Europe and Asia
GBP: UK PMI Services 53.6 vs. 51.0
EUR: EZ Retail Sales 1.2% vs. 2.6%
USD: ADP 8:15
USD: ISM Nan-Manufacturing 10:00
FX markets were generally quiet in Asian and early European trade, carving out 20 to 30 pip ranges as traders awaited key data out of the US later today.
In early Tokyo dealing the dollar was a bit rattled by news that aides to President Trump have offered a list of candidates for the Fed chair and although Janet Yellen was in it, they withheld recommendation. Although Ms. Yellen’s chances for reappointment were never strong, the confirmation that Mr. Trump is clearly looking elsewhere shook the market which looks at any change at the Fed as a sign of risk.
In UK today the PMI Services printed a bit better than forecast at 53.6 vs. 53.2, providing some relief to the bulls who had to endure two PMI misses this week. Still, the underlying data suggested that troubles exist in the largest sector of UK economy. Markit noted that:
“Service providers commented on subdued business-to-business sales and delayed decision-making on large projects in response to Brexit related uncertainty. Reflecting this, latest data indicated that overall new business volumes expanded at the slowest pace since August 2016.”
Cable rose in response to the data, but the move was muted as it topped out at 1.3275. The pair remains in a near-term downtrend but may have found some support at the 1,3250 level for the time being.
Today, the movement of the majors will likely depend on US data with both ADP and ISM Manufacturing due later in the day. The market anticipates very soft labor data reading due to the impact of hurricanes last month, so any print near 125K is factored in. If however the news surprises to the upside the greenback is likely to rally with USD/JPY retaking the 113.00 figure on the assumption that the Fed is sure to raise rates in December given the resilience of the US economy. If on the other hand, ADP prints below 100K, Fed funds futures are likely to plunge on increased concern that US growth may slow into the year-end and USD/JPY may drift below 112.00 support once again.
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