Dollar recovers ground against Euro and Sterling
UK Services purchasing managers index printed higher at 55.4 and the composite (services and manufacturing) index was also revised higher than estimated. Staff shortages were holding back both output and new orders while supply constraints and a spike in costs triggered further upward pressure on prices with output charges rising at a record pace. The Pound benefited from the data, immediate fears surrounding fuel shortages continued to ease and the bounceback in Wall Street equities was also a significant factor underpinning global risk sentiment.
Overall, Sterling posted a net advance to around 1.3635 against the dollar while the Euro dipped to test support near 1.1764.
ECB President Lagarde stated that the bank will pay close attention to wage developments, but remained confident that higher inflation would be transitory (no need to move interest rates yet). The Dollar was unable to gain significant traction, and the Euro settled just above 1.1600.
Overnight Brent Crude rose above $83.00 per barrel due continued concerns around energy supply and the OPEC+ decision to continue their planned output increase rather than increasing it further. Also, five EU nations have asked the EU to take urgent action on skyrocketing gas prices by coordinating purchases to increase bargaining power.
In the US, the Senate is due to vote on measures to suspend the debt ceiling, but the Republican party look set to thwart efforts and the uncertainty has led to gains in the USD. Also, the latest US ADP jobs data will be released today, dictating expectations for Friday’s payrolls data.