Markets await crucial raft of data over next days, as dollar continues to rally against counterparts

Tom Tong03/Jul/2013Currency Updates

GBP

The only data released yesterday of note from the UK was the Construction PMI index released by Markit which showed a second consecutive month of rising activity. The figure stood at 51; an improvement of last months reading of 50.8 and, although narrowly missing consensus a reading of 51, shows the industry is growing significantly. Construction has been under pressure recently with several low readings in late 2012 and early 2013, the two latest positive readings are the first to be seen consecutively since the middle of last year. Many analysts believe with the purchasing managers reporting that both manufacturing and construction improved further in June, the prospects for second quarter GDP is looking ever more promising.

With this further promising data, the pound gain against the euro for the first time in days, moving away from a month low against the single currency. Despite a volatile time of late for the pound a survey released by Bloomberg and its correlation weighted indices yesterday showed that it had appreciated 4.1 percent in the last three months.

Today is the all important PMI figure for the services sector. This will be closely watched as continuing strong data may effect the initial moves and plans of the new Governor of the BOE Mark Carney.

EUR

After a few days respite the eurozone suffered further disappointment with its unemployment figures as eurostat, the EU’s statistical agency upwardly revised the unemployment rate. A statistical error was cited as the reason for the figure to adjust up .1% to 12.2%.

Portugal’s government was thrown into disarray yesterday as leader of the ruling coalition’s junior partner quit as foreign minister which was the second high profile resignation in two days. Prime Minister Pedros Passos pledged to remain as leader and forge a stable government but it adds more pressure on an already fragile leadership.

In addition, data yesterday showed that the eurozone’s producer price index fell by 0.1% in May compared to May 2012. Prices for producers fell marginally more than expected to -0.3%. The only positive news came from Spain which posted a fall in unemployment for a fourth month in a row. The number of Spaniards claiming unemployment fell by 127,000 last month which was a record drop for the month of June.

Several European banks suffered embarrassment yesterday as S&P lowered its long term credit rating for Credit Suisse, Deutsche Bank and Barclays from A to A- plus while also reaffirming the short term rating of UBS of A/A-1. It stated that increase regulatory initiatives were becoming more onerous for the banks and that there would be less attractive business opportunities.

This morning sees the release of the markit services PMI and Retail Sales, both of which are tier two data.

USD

The Greenback continued strengthened yesterday ahead of data that is forecast to show the service industries expanding and that the US adding more jobs in June. The dollar index rose against a broad range of currencies as it reached the strongest level against the Euro and the Yen in four weeks. Attention is quickly focusing on the all important non farm payrolls that are released on Friday afternoon.

New York Fed President William Dudley repeated the comments he made last week trying to calm markets reiterating the US central bank will likely support recovery before it pulls back. He stated the possibility of a reduction of the central banks bond purchasing program will be stepped up in 2014 as growth increases and ‘The private sector of the economy should continue to heal, while the amount of fiscal drag will continue to subside’.

As previously mentioned the data released today includes ADP Employment, The Trade Balance and ISM Non-Manufacturing PMI.

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Written by Tom Tong

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