AU GDP comes in line sending AUD up relief rally
UK PMI Services misses sending cable below 5350
Nikkei -0.59% Europe 0.83%
Oil $50/bbl
Gold $1202/oz.
Europe and Asia:
AUD GDP 0.5% vs. 0.5%
GBP PMI Services 56.7 vs. 57.6
EUR Retail Sales 1.1% vs. 0.2%
North America:
USD ADP 08:15
USD ISM Services 10:00
CAD BOC 10:00
UK PMI Services report came in mixed putting more downside pressure on cable as the pair slipped below the 1.5350 mark in morning London trade. UK PMI Services printed at 56.7 vs. 57.6 eyed falling below estimates for second month out of the past three.
The underlying data however was not as weak as the headline number with new orders and employment and prices all rising. The report shows that UK economy remains stable and healthy and its largest sector continues to sit comfortably in expansion territory. According to David Noble at CIPS, "The protracted length of backlog accumulation indicates that the recovery may now be sustainable following the rapid growth of last year."
Cable however fell victim to overall dollar strength with the pair drifting to session lows at 1.5325 as the other majors saw some pressure as well with EUR/USD coming close to the 1.1100 mark. The market is clearly back to buying dollars as traders anticipate that the latest batch of US data will prove supportive to Fed-hike-in-June scenario.
Today's ADP numbers and more importantly ISM Services numbers will provide some crucial color on the state of labor demand and business activity last month. Monday's ISM Manufacturing surprised to the upside and provided a much needed boost for the buck, but while the ISM Services report is expected to be just slightly lower than the month prior, there is strong chance that it may miss, as the inclement weather in much of the US in February no doubt dampened demand and slowed activity.
Any sharp drop in the data could delay any action by the Fed from June to September and push USD/JPY back below the 118.00 mark markets adjust their expectations. That is why today's data could be so critical as another failure at the 120.00 level could signal a deeper correction ahead for the pair.
On the other hand another upbeat reading could be the nail in the coffin for the nascent EUR short covering rally and could push the pair towards the spike lows near the 1.1000 level reached last month as the divergence in monetary policies between ECB and Fed begins to take hold.
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