Previous Day's Market Highlights
Wednesday’s main order of business was once again the usual monthly set of PMI surveys, this time for the services sector. The data painted a bleak picture of the UK economy, with the PMI reading just 50.2, almost a whole index point softer than expected and indicative of stagnation in the sector over the month of June. Also of concern for the UK economy will be the composite PMI, a weighted average of the individual sectors, falling to 49.7 - its first dip into contractionary territory since just after the Brexit vote in July 2016. These releases point to, at best, economic stagnation in the 2nd quarter, with contraction in the economy also a distinct possibility, validating BoE Governor Carney’s Tuesday speech flagging the downside risks facing the UK economy. For the pound, the disappointing releases exerted downward pressure. Sterling shed 0.2% against the dollar, recording a 3rd consecutive daily loss and falling to a 2-week low. Against the euro, the pound recorded back-to-back daily losses for the first time in a week, dipping 0.1%.
PMI data was also in focus from the eurozone, where figures showed the services sector expanding at a solid rate. June’s PMI figure rose to 53.6, modestly above the flash estimate, helping to push the composite figure to 52.2, the highest level since November 2018. However, economic expansion is not broad based, with services continuing to underpin growth, and additional ECB stimulus remaining highly likely while economic momentum remains weak. The euro held steady on Wednesday, largely unmoved by the data, though market participants may have been reassured by the European Commission’s decision not to enact an excessive deficit procedure against Italy.
Across the pond, a number of data points were released from the US ahead of today’s Independence Day holiday. Of most interest to markets was the ISM non-manufacturing PMI figure, released at a softer than expected 55.1. Though this continues to represent a solid pace of expansion, the index now stands at its lowest level since July 2017, driven by declines in employment and new orders. Also released from the US were ADP employment change figures, which showed a below-forecast 102,000 private sector jobs added to the US economy last month. Though the correlation with Friday’s official labour market report is doubtful, the data does point to a softening in the US jobs market. Other releases were broadly in line with expectations, including the widest US trade deficit in 6 months. The dollar shrugged off the data releases, adding around 0.1% over the course of the day, ignoring President Trump’s latest rant about the eurozone and China playing the ‘big currency manipulation game’.
Wednesday’s best performers were the Aussie and Kiwi dollars, both antipodeans gaining more than 0.5% as risk appetite remained healthy. The Canadian dollar also gained, adding 0.3%, with firmer oil prices providing support.
Away from FX, equity markets continued their recent rally, fuelled by thawing US-China trade relations. The pan-European Stoxx 600 closed up 0.8%, while the US benchmark S&P 500 gained 0.7%, closing at a 3rd straight record high, and just 0.1% away from the significant 3000 handle. Finally, oil prices rebounded somewhat after Tuesday’s significant declines. Global benchmark Brent added 2.3%, while US WTI crude added a shade under 2%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today’s economic calendar is incredibly quiet, with liquidity also likely to be sharply reduced, with US markets closed for Independence Day. This should see most majors remain well-confined to their recent ranges, with little volatility likely.
The only notable release of the day comes from the eurozone, with this morning’s retail sales figures, a useful indicator of consumer spending. Data is set to show sales increased by 1.6% on a year-on-year basis in May, largely unchanged from April’s figure, while increasing by 0.3% on a month-on-month basis, erasing April’s decline. A couple of ECB speakers are also scheduled, with remarks from Chief Economist Lane and Vice President de Guindos due this morning.
Today's Economic Calendar
|10:00am||EUR||Retail Sales (MoM - May)||0.3%||-0.4%|
|10:00am||EUR||Retail Sales (YoY - May)||1.6%||1.5%|