Service Sector election bounce benefit
Services sector PMI’s printed at a six month high of 50, slightly higher than the preliminary readings of 49.0 although the sector is still stagnating. New orders growth hit a six month high, business confidence hit a 15-month high and employment increased slightly. The Prime Minister’s official spokesman reiterated the “no extension to the UK implementation period” stance and political tensions return as the House of Commons re-opens, with Brexit legislation on the agenda this afternoon. Given the large Conservative Party majority the atmosphere within the House will be starkly different.
Sterling sentiment remained stronger allowing a push to highs near 1.3175 on the Dollar and 1.1765 on the Euro. Futures market data showed another small increase in bets on Sterling rising, which limits the potential for short term buying as some have gambled on better. This morning the Pound had modestly corrected to near 1.3150 against the Dollar and the Euro much where it was.
The US final December PMI services-sector index was revised up to a 5-month high of 52.8 from the flash reading of 52.2. The pace of new business growth strengthened with the first increase in export orders since July while employment growth strengthened to a 5-month high. There were no comments from Federal Reserve officials during the day.
EUR/USD will likely break higher (against the USD) if the US ISM non-manufacturing data for December, due at 15:00 GMT, prints below November’s reading of 53.9, signalling deceleration in the activity. A reading below 50 would imply contraction however the market is expecting a print of 54.5.
The final Euro-zone PMI services index was revised higher to a 4-month high of 52.8 from the flash reading of 52.4. New business also expanded slightly for the month and employment edged higher. The Sentix investor confidence index strengthened to 7.6 for January from 0.7 previously which was above consensus forecasts and the highest reading since November 2018. The data overall provided a limited boost in the Eurozone outlook amid hopes for a recovery during the coming year. The Euro secured slight gains following the data releases and pushed to the 1.1200 key figure as the US dollar lost wider ground.
The common currency has settled around 1.1175 as we start Tuesday trading session ahead of the Euro-zone’s CPI inflation data.
Data to watch
10.00 EUR – CPI Flash Estimates
15.00 USD – ISM Non-Manufacturing PMI