Europe and Asia:
AUD RBA cash rate 2.5%
EU Final Services PMI 53.1
vs. 53.1
GBP UK PMI Services 58.7
vs. 57.9
EU Retail Sales 0.3% vs.
-0.2%
North
America:
USD Trade Balance 8:30 AM
CAD Ivey PMI 10:00 AM
Pound hit its highest level since 2009 in London morning trade today coming
within reach of the the key 1.7000 level after UK PMI Services
report surprised to the upside providing further
evidence that UK economy is enjoying the
best growth in the G-10 universe.
UK PMI Services Printed at 58.7 versus 57.6 with employment component
rising to 56 from 53.5 - its best level since October 2013. The UK economy continues to fire on all cylinders as the
composite index rose to 59.4 - well above the 50 boom/bust line.
Services is the largest component of the UK economy and today's data
provides further fuel to cable bulls who anticipate that the BoE will be the first of the G-7 central banks to raise
rates perhaps later in the year. Indeed today's
OECD report increased its projection for UK growth to 3.2% from 2.4%
forecast earlier, even as the organization lowered the growth rates for
China and US.
Cable shot through the 1.6950 level in the wake of the news, but has since
come off the highs of the day as it consolidated its gains. The pair has not been above the 1.7000 level for more
than 5 years and the run towards that key figure is likely to meet stiff
resistance from bears defending option barriers. However given the powerful fundamental support coming
from UK data, cable is likely to take out 1.7000 in the foreseeable future
as momentum favors the bulls.
Elsewhere, the news out of Europe was also mildly supportive with final PMI
reading coming in line at 53.1 while Spain saw its unemployment rolls
decrease by -111K versus -49K forecast. The marked pick up in demand in EZ
periphery has been one of the key pillars of support for EZ growth this
year and OECD today increased its forecast for the region to 1.2% from 1.0%
prior.
The organization called on ECB to lower rates, but given the pickup in
economic activity the central bank is likely to remain stationary at this
week's Thursday meeting despite the persistent deflationary pressure in
Europe. Euro took out the 1.3900 level in late Asian trade as the dollar
continues to suffer from the decline in US rates. The bond market which
refuses to price in the prospect of growth in the US economy is putting a
lid on any dollar rally which in turn only fuels the euro higher.
Today the North American calendar only carries US Trade data which is
unlikely to have much impact on trade as focus will be once again on the US
10 year rates. Yesterday's better than expected ISM data arrested the fall
in rates providing some support for USD/JPY at the 102.00 level, but the
pair remains mired near the week's lows and could even drift towards the
101.50 level if bond yields continue to sink.
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