UK industrial production and Italian GDP due

• US non-manufacturing ISM highest since 2005 on orders and jobs

• 20,000 Russian troops amass on border, Putin talks sanctions

• UK services PMI shows 8 month high following manufacturing disappointment

• UK industrial production and Italian GDP due

Movements of Russian troops on the Ukrainian border have combined with a speech by President Putin to put global assets lower overnight. Some 20,000 troops are said to have amassed on the border between Russia and Ukraine with plans seemingly not far from invasion. A speech delivered by President Putin called for acknowledgement of a humanitarian crisis in Eastern Ukraine and urged the UN Security Council to meet on the matter. In the meantime, he would have the west believe that there are 20,000 aid workers on the border; pay no attention to the tanks, rifles and camouflage gear.

Also within Putin's speech was a call for his government to start drawing up retaliatory sanctions against the European Union with rumours of a ban of EU commercial airlines from Russian airspace. Russia's move to snub the European Union yesterday and sign a 5 year trade deal with Iran,that would include the purchase of Iranian oil, will not have gone unnoticed in western capitals either.

In the past three months or so it has become clear that the Russian economy has begun to feel the effect of the increased sanctions placed upon it. The central bank remains in a stance that will act to prop up the rouble and has resorted to 2% of rate increases this year to stymie the flow of capital out of the country. Yesterday's PMI numbers from the Eurozone however, showed a distinct lack of ill effects from bans on Russian trade.

Germany’s number surprised to the upside; winning the World Cup obviously has its uses! France’s and Italy’s measures remained broadly weak however on jobs and output, and we expect that to continue through the 2nd half of the year.

The UK’s own measure showed that the services sector continues to drive the UK’s expansion; July’s figure moving to an 8 month high. Within that there are further signs of commendable strength. Job creation has continued the trend of improvement seen through the first half of the year, something that will only extend given the rise in work backlogs hitting a 7 month high. This will eventually show in wage settlements although these remain low and stable at the moment. Sector strength has been seen domestically and, more importantly, internationally, which stands in contrast to recent thoughts from corporates in the manufacturing sector that the recent strength of the pound may be damaging British businesses’ prospects abroad

Despite that, the stand out figure of the session was the US's ISM release that blew to the highest level since 2005. Driven by strong pick ups in employment, orders, output and overall business activity the US service sector has started the 2nd half of the year in fine fettle. The USD strength of the past few weeks has continued overnight; a mixture of that strong US data and some haven flows following the news out of Ukraine. USD bulls will be targeting 1.6750 in GBPUSD and towards the 1.33 figure in EURUSD through the rest of the week, although the US data calendar now quietens down until Monday.

Further falls for the NZD were seen yesterday after a poor dairy auction by the largest milk co-op in the country, Fonterra. Milk and dairy based products make up 7% of New Zealand GDP and around 30% of the country's exports and yesterday's 8.4% fall in prices will damage the macro outlook moving forward.

Arguably the UK industrial and manufacturing production numbers due this morning at 09.30 are sterling's most important releases of the week. Tomorrow's Bank of England meeting will have no impact on things. The minutes due in 2 week's time are far more important as the divisions within the Monetary Policy Committee become more evident.

Previous releases of UK industrial and manufacturing production numbers have diverged wildly from that month’s PMI readings. The market is looking for a positive reaction and revision to June’s 1.3% fall in production overall.

Have a great day.