UK Services PMI Slips Unexpectedly
An ease in today’s services PMI data in the UK has weakened hopes that overall activity in Britain’s private sector remained firm last month. This follows upbeat manufacturing and construction PMI readings in the nation earlier this week. Today’s less than anticipated reading has raised doubts among market participants about the strength of Britain’s economic growth for the first quarter of 2015. In the Euro zone, today’s retail sales data will be eyed for any upside surprise, especially considering yesterday’s robust German retail sales numbers.
Across the Atlantic, today’s ISM non-manufacturing PMI report coupled with the ADP’s private sector employment gauge will keep investors interested in the latter half of the trading session.
Pound Sterling – UK Markets
In contrast with this week’s upbeat manufacturing and construction PMI readings in the UK, the just out print showed that Britain’s services PMI eased unexpectedly for February. Considering that the services sector is a key part of Britain’s economy, a slowdown in the expansion of this segment has raised concerns among investors. Going forward, traders will look to the BoE’s policy meeting scheduled tomorrow and Friday’s consumer price inflation expectations report in the UK. Tomorrow’s meeting is unlikely to stoke much interest among Sterling investors as the central bank is anticipated to keep its key interest rate unchanged. However, Friday’s inflation forecast by the BoE will be scrutinised, especially after Mark Carney recently hinted that the weakness in Britain’s inflation is expected to remain short-lived.
The Pound traded range bound against the greenback yesterday. Data released in the UK revealed that construction PMI improved unexpectedly for February and reached a four month high, although the pace of hiring in the construction sector slowed.
US Dollar – US Markets
The US Dollar is trading firmer against the majors this morning as focus shifts to a busy US macro calendar day. Earlier this week, the ISM report showed that manufacturing PMI for the last month dropped to the lowest since January 2014. Market participants await today’s ISM services sector report in order to ascertain the performance of the overall private sector in the first quarter. If service sector activity slows alongside the manufacturing sector, it could possibly reinforce the Fed’s stance to be patient in raising interest rates. Separately, the US ADP employment report for February will be particularly eyed today to gauge if the job market maintained the pace of expansion seen last year. Today, the US Federal Reserve will release its Beige Book report describing the current economic conditions in the nation.
With no major economic release in the US yesterday, the greenback traded flat against most of its key peers. Moving ahead, Friday’s nonfarm payrolls and earnings report for February will be keenly watched for further insights into the state of the US labour market.
Euro – European Markets
The Euro resumed its slide against its peers and nudged well below the 1.12 mark against the US Dollar ahead of the ECB’s monetary policy meeting scheduled tomorrow. Market participants await details related to the breakdown and procedure of the ECB’s proposed asset purchase programme. Meanwhile, in the midst of persistent fears about the fiscal health of the Euro zone economy the rating agency, Fitch, cautioned that Greece’s sovereign debt rating could be slashed further if a "durable" aid agreement is not reached. Meanwhile, today’s PMI readings showed that the services sector in the Euro zone expanded less than initial estimates.
The single currency firmed against its major peers in yesterday’s trading session. Data released yesterday showed that retail sales in Germany rose higher than market expectations for January, strengthening hopes that private consumption could boost growth in the Euro zone’s largest economy this year. On the other hand, producer prices in the Euro zone eased more than market expectations for January, highlighting the deflationary challenges facing the region.
Other Currencies – Highlights
The Canadian Dollar is trading lower ahead of the Bank of Canada’s interest rate decision, scheduled later today. Market participants expect the central bank to keep interest rates steady. Last month, the BoC Governor, Stephen Poloz, had hinted that there would not be a rate cut in the next meeting. Additionally, he had mentioned that the January rate cut would help the central bank buy time to assess the effects of falling oil prices on the nation’s economy.
The GDP data released yesterday indicated that the Canadian economy expanded at a higher rate than market expectations for the fourth quarter of last year. Since the January BoC meeting, there have been many positive macro releases from the nation including consumer price inflation, housing starts and manufacturing shipments which confirms the view amongst traders that the central bank will keep rates unchanged in today’s meeting. Investors will pay particular attention to today’s meeting to gauge whether the BoC provides any hints of a future rate cut.