US dollar falls further after troubling services PMI report. Pound runs

Today’s price action highlights how fragile the US dollar is.

There is no doubt that it’s a crowded trade and anytime a trade gets overcrowded everything needs go perfectly to keep it going. Today there was a pair of economic data releases that were far-from-perfect. The S&P Global services PMI fell to the lowest since April and the UMich consumer confidence survey was revised lower.

At the same time, the PMIs out of the eurozone and UK were better than expected.

That’s been enough to launch a 140-pip squeeze higher in cable to 1.2490. So far offers at 1.2500 are holding but it’s been a big move that builds off a similar-sized pop last week.

Another notable call today (though it goes against the idea of this being an extremely-contrarian trade) came from Blackrock’s Larry Fink who said there is too much pessimism around Europe and it could be time to be investing again.

Similarly, Christine Lagarde said this:

“If European leaders can get their act together and respond to this
existential threat, there is a huge potential for Europe to respond to
the call,” she said.

That is certainty a tall order given Europe’s bureaucracy but it’s an opportunity.

I believe that the best place to invest in the developed world for the next decade will be whatever country figures out how to build things again. There is a growing consensus that the red tape is unbearable but solving it is no easy feat.

This article was written by Adam Button at www.forexlive.com.