Markets await ECB decision
05/Jun/2014 • Currency Updates•
Sterling rebounded across the board yesterday, taking points off both euro and dollar. After the losses of the last few days the pound is now back to where it was at the beginning of the week.
The key driver of yesterday’s strength was an early Markit services report, which came in at a powerful 58.6, above the 58.2 predicted.
The state opening of Parliament, colloquially known as the Queen’s speech, offered little of interest to money markets, although pension reform could have some long effect on equities.
Today, having seen house prices shoot up and over expectation this morning, we have the Bank of England monthly interest rate decision and a statement from the Governor.
The euro suffered again at the hands of sterling strength, although its strong performance earlier in the week means that it has balanced out across the period.
Markit was as harsh to the services sector as it was to manufacturing on Tuesday, with all bar one of the countries surveyed posting a negative monthly change. Italy was the only exception. Euro-wide PMI fell to 53.2, 0.3 under expectation.
GDP came in bang on expectation and as such failed to make any waves in markets. 0.2% QoQ growth shows no progression from a poor reading in Q4, although consistency is marginally better than shrinking growth.
Today the focus is on the euro, with the much anticipated interest rate decision at 12.45 UK time. Draghi’s press conference follows, at 1.30.
The greenback fell off against the pound early on yesterday, but not by enough to keep it away from a weekly gain. Trading against the euro was volatile but with no significant movement.
Markit and ISM offered different perceptions on the US services sector, with PMI showing a contraction from last month and ISM showing a gain. Both readings however are way over the 50 mark, signalling expansion.
New research published yesterday gave an expectation for a strong NFP on Friday, with 213,000 jobs to be added. Naturally, that will be the key play for the dollar tomorrow.
Today we have initial and continuing jobless claims, a reliably accurate high frequency reading which could give an early hint for Friday.