- EZ Final Services PMI revised lower to 56.8 from 57.2
- UK Servics PMI misses 52.6 versus 53.8 eyed
- Nikkei up .89% Europe nearly flat on open
- Oil at $101/bbl
- Gold at $1431/oz.
- AUD AIG Services Index 48.7 vs. 45.5
- AUD Building Approvals m/m -15.9% vs. - 3.1%
- AUD Trade Balance 1.88B vs. 1.53B
- CHF Retail Sales y/y -2.6% vs 1.7%
- EUR German Retail Sales m/m 1.4% vs. 0.5%
- EUR Final Services PMI 56.8 vs. 57.2
- EUR Retail Sales m/m 0.4% vs. 0.4%
- EUR Revised GDP q/q 0.3% vs. 0.3%
- EUR Minimum Bid Rate 1.00%
- UK Svc. PMI 52.6 vs. 53.8
Event Risk on Tap
- USD Unemployment Claims expected at 386K
- USD Revised Nonfarm Productivity q/q expected at 2.6%
- USD Revised Unit Labor Costs q/q expected at -0.6%
- USD ISM Non-Manufacturing PMI expected at 59.9
- USD/JPY 82.00 caps as tight range persists
- AUD/USD runs to 1.0180 in late Asia but drifts to 1.0150
- GBP/USD falls through 1.6300 as PMI Services disappoints
- EUR/USD can't take out 1.3900 and drops back to 1.3850 ahead of ECB
@import url(/css/cuteeditor.css); Risk FX came under some selling pressure in morning European trade today after a series of PMI readings from EZ and UK missed their mark, disappointing the market. EZ Final PMI Services printed at 56.8 versus 57.2 originally forecast while UK Services PMI declined to 52.6 from 54.6 the month prior. The news cast a negative pall on what had otherwise been a generally upbeat week of economic data from Europe sending EUR/USD back to 1.3850 while cable dropped below the 1.6300 level in the aftermath of the release.
For UK policymakers the disappointing PMI services read suggests that the economy may be too fragile to start the tightening process just yet. According to Markit, UK companies were still shedding workers for fifth month in a row indicating that the service sector still remains relatively soft. Despite better than expected UK Manufacturing and Construction PMI data, the service sector is a much larger part of the UK economy and therefore today's weaker than expected results are likely to have greater impact on BoE's decision making process.
In the EZ the data was relatively more upbeat with EZ Retail Sales rising by 0.4% as expected off a strong jump in German Retail sales which increased 1.4% versus 0.5% eyed. EZ GDP also came in line at 0.3% versus 0.3% forecast. Finally news out of the periphery also showed some improvement with Spanish PMI rising above 50 for the first time since July of last year while Irish Services PMI rose above 55. The region is clearly seeing a pick up in economic activity and the strength in the core economies is starting to slowly translate into improving fundamentals in the periphery as well.
The focus today however will be on the ECB press conference due at 13:30 GMT. The market is eager to hear from ECB President Jean Claude Trichet as it looks for him to abandon the "inflation risk are evenly balanced" line in favor of a more hawkish assessment. The slight miss in EZ PMI readings notwithstanding, the latest economic data out of the EZ has been generally better than forecast eliminating concerns that any tightening by the ECB could cause an inadvertent slowdown in the EZ recovery. If Mr. Trichet does assume a more hawkish posture the EUR/USD could make a run at the 1.3900 level as interest rate expectations ratchet higher. On the other hand if Mr. Trichet simply repeats his past remarks, the EUR/USD could fall through 1.3800 on disappointment.
In North America today the key event of the day will take place at 15:00 GMT when the ISM Non Manufacturing reading will be announced. This is the final major release ahead of tomorrow's NFP report and could provide the best clue to the employment data on Friday. The market anticipates a slight uptick to 59.6 from 59.4 the month prior, but if the number prints at 60 or better it could provide a lift for the dollar against the yen and the Swiss franc as evidence of faster US economic growth will suggest that the Fed may curtail its accommodative policy sooner rather than later.
|USD||13:30||8:30||Revised Nonfarm Productivity q/q||2.6%||2.6%|
|USD||13:30||8:30||Revised Unit Labor Costs q/q||-0.6%||-0.6%|
|USD||15:00||10:00||ISM Non-Manufacturing PMI||59.9||59.4|