Services PMI in the UK eased for December and fuelled concerns among investors that economic activity in the UK is slowing especially after recent signs of softening in Britain’s manufacturing and construction sectors. Investors will continue to eye economic updates in the UK going forward, to verify if the recent downtrend in the country’s macro performance is due to concerns about policy change ahead of this year’s general election or due to a slowdown in Europe.

Across the Atlantic, the ISM non-manufacturing PMI survey scheduled later today is expected to attract considerable attention among traders. In the Euro zone, speculation strengthened that the ECB will launch a sovereign bond purchase programme in its upcoming policy meeting, particularly after Germany’s inflation data missed estimates yesterday.

Pound Sterling – UK Markets

Data just out showed that the services PMI in the UK eased more than expected for December, pointing towards a slowdown in Britain’s non-manufacturing activity, especially after similar signs of deceleration were witnessed in the manufacturing and construction sectors. Amid recent macro updates pointing towards a slowdown in Britain’s economy, traders remain uncertain whether the deceleration is due to concerns about policy change after May’s General Elections or the UK economy is facing headwinds from a slowdown in Europe. Separately, the BoE’s credit conditions survey released today failed to shed any light on the timing of an interest rate rise in the UK, following which investors will now eye the BoE’s policy meeting later this week for further hints about the central bank’s policy stance going forward. The Pound is trading on a weaker footing against the Euro following the release of today’s data.

Sterling dropped below the 1.53 mark against the greenback yesterday after data released in the UK revealed that the pace of activity in the construction sector slowed to its lowest level since July 2013.

US Dollar – US Markets

The greenback is trading in a tight range against the Pound ahead of the ISM non-manufacturing PMI data in the US today which is expected to show a deceleration in expansion for the services sector activity for December. Considering that the ISM’s manufacturing gauge in the US showed a more than anticipated fall last month, a slowdown in the services sector PMI is likely to stoke worries, particularly considering the weak global macro climate. Additionally, investors will eye factory orders report in the US later today which is expected to show a fourth consecutive drop in demand among domestic manufacturers for November. Going forward, traders will keep a tab on the minutes of the US Fed’s most recent policy meeting due for release tomorrow to gauge the timing of an interest rate rise this year.

Yesterday, the US Dollar remained supported against the Euro after downbeat consumer price inflation data released in Germany strengthened prospects of quantitative easing measures in the Euro zone.

Euro – European Markets

In yesterday’s trading session, the common currency lost ground against the greenback and briefly dropped below the 1.19 level following the release of a soft consumer price inflation report in Germany. Investors showed concern that the ECB appears likely to begin large purchases of government bonds in its upcoming policy meeting on January 22 to avert the threat of deflation in the region. Moving ahead, investors will keep tabs on tomorrow’s flash consumer price inflation readings in the Euro zone to gauge any downside movement, particularly after yesterday’s downbeat German inflation data.

The Euro is trading slightly higher against the Pound after the revised Market services PMI report in Germany for December came in better than expected, despite the fact that PMI for the Euro Zone disappointed. Meanwhile, risk appetite among investors is likely to remain broadly subdued ahead of snap elections in Greece later in the month, especially amid possibilities that a victory of the opposition might lead to the nation’s exit from the Euro zone.

Other Currencies – Highlights

The Aussie Dollar gained ground against the greenback and climbed above the 0.81 mark earlier today after trade data released in Australia showed a smaller than expected deficit for November, despite falling commodity prices continuing to weigh on export receipts. Additionally, a report released in China showed that the pace of services sector activity in the nation improved for December which further boosted investors’ sentiment and kept the Aussie Dollar supported.

With crucial services sector gauges in the US and Australia scheduled later today, the Aussie Dollar is likely to witness some volatility against the greenback in the latter half of the trading session. Going forward, market participants will keep a tab on consumer price inflation expectations data in Australia along with the minutes of the Fed’s most recent policy meeting and labor market report in the US later this week for further direction.