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ECB on the menu

ECB on the menu


UK Services PMI’s edged higher, beating the forecasts with 51.0 for May, up from April’s figure of 50.4. New business grew for the first time this year, employment grew at the fastest pace since December 2018 and business expectations also increased. There is still evidence that Brexit uncertainty was undermining the sector, but the data provided some relief given the poor manufacturing and construction earlier in the week. UK gilt yields continued their decline but the Pound gained some protection from concerns over other major economies, declining bond yields global and a lack of major political developments.

Sterling pushed to highs near 1.2750 against the Dollar before fading and the Euro slipped to circa 1.1300. This morning the Pound opens slightly lower at 1.2675 on the Dollar and  1.1288 on the Euro ahead of BoE Governor Mark Carney’s speech at 10am.



Eurozone services PMI strengthened to 52.9 in May, bettering the preliminary readings of 52.5. The  German data component was revised upward although business confidence weakened and German bond yields declined again to record lows. The Euro was undermined by the EU Commission deciding that Italy is in breach of fiscal rules due to rising debt and that disciplinary procedures would be justified.

The Euro retreated from above 1.1300 as the Dollar regained ground to settle near 1.1230 . Eurozone Q1 GDP data is due this morning, and the ECB policy meeting after lunch closely watched , although no major policy change is anticipated.



The US dollar was on shaky ground, losing against the G-10 currencies yesterday morning. Federal Reserve (Fed) Chair Powell’s comments triggered a broad sell-off after he signalled that the central bank will “act as appropriate to sustain the expansion”. The market reacted quickly, taking it as a cue that the Fed is running out of patience and could move towards easing its monetary policy.

The US ADP data recorded an increase in private sector employment of 27,000 for May following a revised 271,000 increase the previous month. The increase was well below consensus forecasts of 185,000 and the weakest gain for over 8 years. There were notable job losses in the retail and construction sector while small companies also recorded sharp losses.

Following the ADP data and Fed comments, futures markets indicated that the chances of a Fed rate cut at the June meeting had increased to 33% from 20% last week and the Euro briefly moved to the 1.1300 level amid wider dollar losses. ISM non-manufacturing data triggered an element of relief with an increase to 56.9 for May from 55.5 previously and above consensus forecasts of 55.6. New orders and employment indices were firm on the month and employment increased at a faster pace. Although there was a slowdown in order backlogs growth, the data provided significant relief.

Data to watch

7am EUR German Factory Orders s.a. (MoM) (Apr)

10am GBP BoE Governor Mark Carney Speech

10am EUR Eurozone Q1 GDP, YoY and QoQ

12.45pm EUR ECB Interest Rate Decision

1.30pm USD Trade Balance (Apr)

1.30pm USD Continuing Jobless Claims

1.30pm USD Initial Jobless Claims

1.30pm EUR ECB Monetary Policy Statement and Press Conference

1.40pm USD Fed’s Kaplan Speech

6pm USD Fed’s Williams’ Speech


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