UK Service Sector Expands at a Slower Pace
Just released data indicated that growth in Britain’s service sector activity eased more than market expectations for July, signalling a dent in optimism among businesses in the service industry. In separate data, BRC earlier today reported that shop prices in the UK fell sharply for July, offsetting the marginal rise in food prices witnessed for the first time in seven months.
In Europe, a survey data showed that Euro zone business growth accelerated and service sector performed better than initial estimates for July, suggesting that economy is on track for moderate recovery this year. Across the Atlantic, the ADP employment change report and final services PMI reading scheduled later in the day are expected to draw significant market attention.
Pound Sterling – UK Markets
The Markit survey report indicated that activity in the UK’s service sector grew at a slower than expected pace for July, however the service industry still remains well in expansion territory. The survey data indicated that service sector growth eased in July as business services such as architects and accountants registered their weakest growth in almost three years. Meanwhile, hiring in the service industry sank to a multi-month low in July, fuelling concerns that the growth in the labour market has slowed down. Sterling has hardly responded to the economic release and continues to trade in a tight range against the US Dollar. The BoE’s interest rate decision meeting tomorrow could induce volatility in the Pound against its key peers, with markets looking forward to any cues of hawkish sentiment among policymakers.
The BRC earlier this morning reported that shop prices in the UK fell sharply for July, as widespread discounts on summer clothing offset a marginal increase in food prices. With the BRC shop price index remaining in negative territory for nearly two years; it is unlikely that inflationary pressures would rise in the UK in the short term at least.
US Dollar – US Markets
The US Dollar is trading on a firmer footing against the Euro this morning, as sentiment for the greenback improved after Fed Atlanta President Dennis Lockhart’s hawkish comments late yesterday raised the odds for the US Fed to raise interest rate in the September policy meeting. Also, the US Dollar found some support yesterday from the latest upbeat data on US factory orders, which rebounded strongly for June amid robust demand for transportation equipment and other goods.
Markets will now shift their attention towards a string of US economic releases scheduled later today for further direction. Among these, services PMI and ADP employment change data will be particularly eyed as markets weigh the possibility of a tightening in the Fed’s monetary policy meeting in September. While the PMI numbers are expected to confirm robust activity in the nation’s dominant services sector, ADP employment data will act as a preview to Friday’s payrolls report for July. Also, US trade balance and weekly mortgage applications update due today would attract some market interest.
Euro – European Markets
It is a busy calendar day in Europe today, as market participants digest a flurry of revised services PMI readings from the Euro zone and its various economies and look forward to an update on retail spending in the Euro zone for June. The final PMI numbers of the Euro zone economies released throughout the morning confirmed that the service sector has not fared as badly as feared at the start of the third quarter. The better than expected reading from Euro zone’s service sector has spurred hopes that the region’s economy will continue to recover moderately for the remainder of the year. However, the upbeat service sector reading has had a limited impact on trading in the Euro and it is currently trading lower against the majors. Moving ahead, today’s data on retail sales in the Euro zone for June is expected to deliver a relatively downbeat message as the risk of Greece exiting the Euro bloc was high during the period.
Meanwhile, some Greek officials and its lenders yesterday expressed optimism that a deal on a third bailout could be achieved within two weeks.
Other Currencies – Highlights
Data released earlier in the day revealed that Switzerland’s economy moved back into deflation in July, falling back from a slight pickup witnessed in price levels during the previous two months. Consumer prices in Switzerland dropped more than expected for July, signalling that the economy continues to be pressured by effects from the strong Swiss Franc. Switzerland’s central bank in a surprise move had abruptly removed the Euro cap on the Swiss currency in January following which the Swiss Franc’s subsequent surge has lowered the price of its imports, while making Swiss exports less desirable. Meanwhile, the Swiss National Bank has projected that prices would continue to fall this year and in 2016. However, CPI data had limited impact on trading in the Swiss Franc and it continues to trade in a close range against the US Dollar.
Moving ahead, trading trends in the US Dollar – Swiss Franc currency pair will be determined by a slew of notable US economic releases scheduled later in the day.