UK Services PMI Report

The domestic services PMI print has surprised markets on the upside this morning and is in sync with the encouraging manufacturing PMI numbers released earlier this week. Although the BoE policy meeting scheduled tomorrow is likely to be a low-key affair, investors will keep a tab on it for hints about a change in policy stance in future. Meanwhile, services sector activity across major Euro zone economies improved for February and investors have now set their sights on today’s domestic retail sales and the revised GDP print for further direction. Across the Atlantic, a slew of important economic data this week, beginning with today’s ISM and ADP reports, will help investors to gauge the strength of the nation’s economy.

Pound Sterling – UK Markets

The just released UK services PMI report has shown that services sector activity in the nation slowed less than expected for February and continues to hover comfortably in the expansion zone. The better than expected services PMI print has limited the downside in the Pound against the US Dollar in today’s trading session. However, the sluggish nature of expansion in the services sector, which accounts for a major portion of the nation’s economic output, will certainly worry investors, especially if the trend persists in the near term. Meanwhile, the Pound was unable to hold on to its early morning gains against the greenback yesterday following the release of construction PMI numbers in the UK which indicated a more than expected slowdown in the construction activity due to adverse weather conditions. Later today, important economic data from the US will determine trading sentiment in the Pound-US Dollar pair. Even though recent economic data has pointed towards continuation of last year’s growth trend, the BoE monetary policy meeting tomorrow is unlikely to offer any major surprises to investors, especially in the wake of subdued domestic inflation data lately.

US Dollar – US Markets

Improved risk appetite amongst investors following Russia’s recall of its troops from Ukraine weakened the US Dollar against its major counterparts during the early part of yesterday’s trading session. However, the greenback managed to recoup most of its early session losses against its major peers later in the day, as demand for riskier currencies faded in the absence of decisive global economic data. Meanwhile, the US Dollar has moved marginally lower against the common currency in today’s trading session tracking the positive European economic data released this morning. Investors will keep a tab on the spate of important domestic macro reports today, including the ISM non-manufacturing PMI and the Fed Beige Book for further direction to risk appetite. However, the ADP employment report is expected to grab most of market attention today for early insights into the health of the domestic labour market ahead of the crucial non-farm payrolls report due later this week. Markets will try to assess the impact of erratic weather conditions in the US on the outcome of these data points.

Euro – European Markets

The common currency gave up its early session gains against the US Dollar in yesterday’s trading session. The brief rise in the Euro was a result of improved risk sentiment in markets following Russia’s pullout of its troops from Ukraine which underpinned demand for riskier assets. In today’s trading session, the single currency has moved marginally higher against the US Dollar following the release of largely positive services PMI numbers from major Euro zone economies. With manufacturing data released earlier this week also pointing towards improved activity, expectations of the economic recovery in the currency bloc gaining traction this year has certainly strengthened. Meanwhile, the Euro zone retail sales and the revised fourth quarter GDP numbers will keep Euro investors on their toes in the session ahead and sway trading sentiment in the common currency against the majors. Furthermore, investors will eye tomorrow’s crucial ECB monetary policy meeting which is likely to offer few surprises. Apart from domestic macro releases, some important US economic data due later today has the potential to alter risk sentiment.

Other Currencies – Highlights

The better than expected Australian fourth quarter growth report released earlier today has strengthened the Aussie Dollar against the majors this morning. Australia’s economy expanded at an annual rate of 2.8% during the final three months of 2013 on the back of increased consumer spending and exports. Additionally, data showed that the services PMI in Australia moved into the expansion phase for the first time since January 2012 and recorded the highest reading since March 2008. The upbeat data has added weight to the Reserve Bank of Australia’s observation that overall economic conditions in the nation have improved and that the central bank’s accommodative policy stance is working. With the economy showing definite signs of a pick-up, the RBA is likely to maintain stable interest rates in the coming months. With no more domestic economic data scheduled for release today, the Australian Dollar will take direction from a slew of important macroeconomic reports scheduled across the globe. Looking ahead, investors in the Aussie Dollar will keep a tab on tomorrow’s domestic retail sales and trade numbers as well as the European central bank meetings for further direction.