Market Drivers for March 05, 2014
- UK PMI Services bit better at 58.2 vs. 58
- EUR Retail Sales
- Nikkei 1.20% Europe -.11%
- Oil $103/bbl
- Gold $1335/oz.
Europe and Asia
AUD: GDP 0.8% vs. 0.7%
GBP: UK Pmi Services 58.2 vs. 58.0
EUR: Retail Sales 1.6% vs. 0.9%
EUR: GDP 0.3% vs. 0.3%
North America
USD: ADP 8:15 AM
USD: ISM Services 10:00 AM
Risk appetite continued in the currency markets as fears over the Russia/Ukraine conflict receded and traders focused on better than expected economic data out of Australia, UK and the EZ.
The situation in Crimea remained tense, with the latest reports by the Interfax agency suggesting that Russian forces seized two Ukrainian missile defense units, but currency markets were nonplussed by the events as the prospect of further military encroachment into Ukraine looked less likely after yesterday's remarks by Vladimir Putin. Mr. Putin's assurance that Russia did not want to annex Crimea or eastern parts of the Ukraine has convinced traders that the situation remains contained for now.
Although most of the major currencies remained relatively flat in Asian and early European trade, yen crosses all rallied with USD/JPY itself rising to a high of 102.44 by mid morning London dealing.
The economic data overnight was generally supportive with Australian GDP beating expectations by printing at 0.8% versus 0.7% eyed. The results were solid with the main contribution coming from net exports and consumer expenditure. Mining was up 1.2% while rental hiring and real estate sectors added a very strong 4.2% on the period prior. Overall, the data from Down Under will keep the RBA stationary and should keep the Aussie supported at these levels. The pair initially spiked to .8999 on the news but found offers at the .9000 level and receded as resistance at that key figure remains strong.
In the UK, the PMI Services report printed at 58.2 versus 58.0 forecast. This was slightly lower than last month's reading of 58.3 and the lowest gage since June of 2013, but still well above expansionary levels. The PMI data suggests that the UK economy is set to grow at a 0.7% q/q rate in Q1 this year. It remains one of the best performing economies in the G-10 universe. Cable rose to a high of 1.6692 but failed to clear the 1.6700 level for the time being.
In Europe the Retail Sales data also surprised to the upside, rising 1.6% against 0.9% forecast, but the news failed to move the EUR/USD as the pair remains contained in the 1.3700 -1.3750 range. All eyes are now focused on tomorrow's ECB meeting, although given the relatively buoyant recent data sets that showed continued strength in Germany and improvement in economic activity in Spain, the prospect of any surprise easing action by the ECB remains remote.
Overall the eco data from overnight continues to suggest that despite weather woes and geopoltical conflicts, global growth remains solid and steady. If today's US data—which includes the ADP report and the ISM Services release comes in line—it should further confirm that thesis and will likely help to push risk trades higher with USD/JPY taking out the 102.50 barrier and lifting yen crosses with it.