Key Sector Activity Eases in UK
The recent Markit PMI reports revealed that activity across Britain’s manufacturing, services and construction sector eased more than estimated for December. Additionally, with recent macro updates showing signs of softening in other parts of the economy, traders will keep a tab on the BoE’s policy meeting tomorrow to gauge if the two policymakers who voted for an immediate interest rate rise in the UK, retain their stance.
Across the Atlantic, after the recent ISM manufacturing and services PMI showed deceleration in overall activity, traders will eye today’s ADP employment report for hints on the labour market. In the Euro zone, investors will eye the preliminary inflation report due later today, which is expected to show a fall in consumer prices for December.
Pound Sterling – UK Markets
In yesterday’s trading session, the Pound lost ground against the greenback and dropped below the 1.52 mark following the release of downbeat services PMI data in the UK. The report showed that the non-manufacturing sector in Britain, which makes up a major portion of Britain's private sector economy, expanded at its slowest pace since May 2013. The print revealed that growth in new orders and employment decelerated across domestic service providers which resulted in yesterday’s services PMI easing more than expected last month. Separately, the BoE’s credit conditions survey revealed that demand for credit card lending increased significantly for the last three months of 2014 due to the festive shopping season. However, the publication indicated that demand for secured lending for house purchases dropped significantly in the fourth quarter.
The Pound is trading in a tight range against the majors this morning. Earlier today, the BRC report indicated that the shop price index dropped less than expected for December. Going forward, traders will keep a tab on tomorrow’s BoE’s policy meeting for further direction.
US Dollar – US Markets
The greenback is trading in a tight range against the majors this morning ahead of key macro updates in the US today. The minutes of the US Fed’s most recent policy meeting will be scrutinised later today, especially after the central bank dropped the “considerable time” phrase in its last policy meeting. Separately, the ADP employment report will be keenly eyed to gain an insight into the nation’s labour market for December, ahead of Friday’s official employment figures.
The ISM non-manufacturing PMI survey in the US released yesterday showed that the pace of expansion in the nation’s services sector slowed more than anticipated for December and fell to its lowest level in the past six months. The survey revealed that hiring across service sector firms and new orders growth weakened last month. Along with that, the print indicated a fall in the prices index, stoking concerns that deflationary momentum might be building up in the US. Separately, another report revealed that November’s factory orders in the US dropped for a fourth straight month. The greenback pared some of its early session gains against the Euro following the release of yesterday’s data.
Euro – European Markets
Data released earlier today revealed that the number of unemployed people in Germany continued to decline for a third straight month and the nation’s unemployment rate dropped surprisingly for December. Another report revealed that retail sales in Germany also dropped unexpectedly on an annual basis for November, despite low energy prices keeping domestic spending levels supported. The Euro has shown little reaction to the mixed economic reports as investors look forward to the crucial preliminary inflation numbers in the Euro zone for December, which are expected to indicate a fall in consumer prices for the first time since October 2009. Amid prospects of an outright deflation in the Euro bloc, market speculation has strengthened that the ECB might unleash a sovereign bond purchase programme in its policy meeting scheduled later this month.
The Euro is trading close to its multi-year lows against the greenback this morning amid persistent concerns surrounding the political uncertainty in Greece, especially considering that the opposition’s victory might lead to the nation’s exit from the monetary union.
Other Currencies – Highlights
The Canadian Dollar lost ground against the greenback in yesterday’s trading session, despite data released in the US showing that non-manufacturing PMI and factory orders missed market estimates. Additionally, with crude oil prices registering losses for a second consecutive day and considering its close correlation with the Canadian Dollar, the domestic currency lost major ground against its key peers yesterday.
Going forward today, market participants will keep a tab on Canada’s trade data which is expected to post a deficit for November and stoke fears over the impact of the recent slump in global oil prices on the nation’s economy. Additionally, the ADP employment report and the minutes of the Fed’s recent policy meeting will attract significant attention among traders in the latter half of today’s trading session. Moving ahead, with crucial labour market reports scheduled in Canada and the US later this week, investors in the US Dollar-Canadian Dollar pair are likely to remain on their toes.