US services growth slows as German business conditions improve
25/Nov/2014 • Currency Updates•
Another quiet Monday in the world markets with a lack of first tier data releases limiting market volatility. Some unexpectedly strong business conditions data from Germany boosted the Euro, while weak PMI figures in the US caused the Dollar to fall on its major peers.
Having declined by 1.5% on the Dollar in the past two weeks, Sterling was able to show strength on Monday, climbing by 0.2% on greenback and rising slightly on the single currency by 0.05%.
Monday was a light data day in the UK, however, businesses in Britain are more optimistic than overseas rivals according to UK research firm Markit. The barometer of business sentiment, measuring the percentage of companies expecting an increase in activity over the next twelve months, came in at 55% for the UK in October. This was down 6% on the summer, but substantially higher than the 31% in the US and 24% in Germany. Sterling strength can also be attributed to improved sentiment for the Bank of England as one of the few major central banks to have avoided increasing stimulus measures.
The main data release today in the UK will be from the British Banker’s Association at 9:30am with the announcement of mortgage approvals for October. Today’s main volatility, however, will be at 10am as the Treasury Committee examines the inflation report.
After falling by 1.1% last week, the Euro regained some ground on the Dollar yesterday, climbing by 0.2%.
Strong data across the board for Germany today eased some concerns over the health of the Eurozone’s largest economy. In a Centre of Economic Studies report, Business Climate, an indicator of business conditions and expectations, unexpectedly rose to a seasonally adjusted 104.7 this month, returning to levels seen in September. Equally as encouraging, the Current Assessment index also increased in November to 110, while the Expectations data rose to 99.7, its best position since August.
Spotlight in the Eurozone will once again be on Germany today as markets react to the GDP data set to be released in early trading.
The US Dollar traded within a narrow band with its major peers for most of the day on Monday before falling late on the back of some weak PMI data. The US Dollar index fell marginally by 0.1%.
The US currency fell against its peers after the announcement that the US services sector expanded in November by a slower rate than last month. The Services PMI, as released by Markit Economics, registered a reading of 56.3 in November, its lowest since April. The data was down 0.8 on last month and surprised markets that only expected a slight drop this month. While the index is still above the 50 level, which signals expansion in economic activity, the growth rate has slowed steadily since reaching a peak of 61 in June. Additionally, the Composite PMI index, a weighted average of manufacturing and services, also fell again to 56.1.
A string of announcements in the US today will no doubt cause a great deal of volatility in the world markets. The Bureau of Economic Analysis GDP data for Q3 at 13:30pm and the Conference Board’s index of Consumer Confidence at 3pm London time are set to cause most market fluctuation.
Rest of the world
Despite the public holiday in Japan on Monday, the Yen fell again on its major peers as central banks worldwide plan to add to monetary stimulus. The Japanese currency lost 0.5% of its value against the Dollar and 0.9% versus the single currency.
Elsewhere, the Brazilian Real was the biggest decliner of the day, falling by 1.1% as question marks arose over the identity of Brazil’s new finance minister.