UK Services PMI Halts Sterling Gains

Today’s UK services sector data has disappointed investors and limited further upside in Sterling. With little on the domestic macro calendar going forward, market focus has now shifted to a slew of economic releases scheduled in the forthcoming week, especially the BoE policy meeting, for further cues to risk appetite. Across the Atlantic, today’s official labour market report might cement hopes that the US labour market is recovering at a decent pace, especially after yesterday’s upbeat ADP employment data. Against the backdrop of largely dismal Euro zone economic data lately, the ECB’s post-meeting press conference today will attract most of the market attention.

Pound Sterling – UK Markets

Data just released indicated that activity in the nation’s all important services sector fell for June, although it continued to remain in the expansion phase for June. The Pound has shown little reaction to the weak services PMI data. Today’s data is in contrast with the manufacturing and construction activity data released earlier this week and has fanned speculation that an interest rate hike might not happen soon. With little on the domestic economic calendar today, tomorrow’s Halifax house price report will be eyed, especially after yesterday’s Nationwide report indicated that house prices in the nation continued to rise for June. Yesterday, the Pound advanced against the Euro after data indicated that the UK construction sector improved at its fastest pace in four months for June, helped by an increase in residential house building and commercial construction. However, gains in the Pound were capped against the US Dollar following upbeat US ADP employment numbers for June.

US Dollar – US Markets

Yesterday, US equity markets scaled new record highs and the US Dollar found support against its major counterparts, mainly on the back of the ADP report which revealed that US private sector employers added more than expected jobs for June, thereby indicating that the labour market is improving at a faster than expected pace. However, dovish comments from the Fed Chief and disappointing factory orders report limited gains in the US Dollar against the majors. The greenback is trading in a tight range, albeit on a firmer footing, against its major counterparts this morning, supported by expectations that today’s non-farm payroll numbers might chart a similar trend as that of yesterday’s ADP employment data. These upbeat numbers would further strengthen the current notion that the economy is bouncing back in the current quarter after a steep decline witnessed during the first quarter of 2014. Additionally, today’s other set of macro data which includes trade balance, ISM services PMI and jobless claims reports will attract modest market attention, although it is likely to be overshadowed by the widely watched official labour market figures.

Euro – European Markets

The ECB policymakers’ meet for the first time after lowering interest rates in their last policy meeting in June. However, today’s meeting is likely to be a non-event as policymakers are widely expected to keep their stance unchanged in order to evaluate the impact of the measures announced earlier. The ECB Chief, Mario Draghi’s post-meeting press conference will attract market attention for cues over the scope of asset purchases in future. Additionally, markets will eye the Euro zone retail sales report which is likely show that consumer spending in the region continues to remain subdued for May. Meanwhile, data released earlier today indicated that services activity in most of the European nations eased for June, in line with the manufacturing sector figures released earlier this week. These dismal numbers have further validated the need for the last month’s extraordinary move in order to boost recovery in the nation. However, the Euro showed little reaction and continued to trade in a tight range against the greenback this morning. An improvement in the UK construction sector for June led the Euro to drop against the Pound in yesterday’s trading session.

Other Currencies – Highlights

With no major domestic economic releases, the New Zealand Dollar is trading lower against the US Dollar this morning. Data released earlier today showed that the Chinese official services PMI eased while HSBC/Markit services activity data surprised markets on the upside. Later in the session today, investors in the Kiwi Dollar will keep a close watch on the US non-farm payrolls report which is likely to show an improving trend as that of yesterday’s ADP employment numbers. In the forthcoming week, a slew of economic releases in New Zealand, including business confidence report and the monthly budget statement, will keep investors interested. The New Zealand remained weak against the US Dollar this week following disappointing domestic macroeconomic reports in New Zealand. However, the upbeat Chinese manufacturing sector report limited losses in the Kiwi Dollar against the greenback.