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The Dollar can’t fight Sterling strength

The Dollar can’t fight Sterling strength

UK Services PMI is the focus of today’s European trading hours. The market expects a slight downtick to 55.1 from a previous 55.6, though any print on or above expectations is likely to support strength of Sterling. The Pound seems to have dismissed poor construction and manufacturing PMI readings seen earlier in the week, and has fought back to break the 1.40 resistance against the Dollar. Five year bond yields declined yesterday, suggesting investors’ confidence despite the Brexit referendum on the horizon. Positive PMI today could see the recovery continue, though a poor reading could mark an end and revert GBPUSD back into 1.39 territory.

The ADP National Employment Report was released yesterday and it showed private sector jobs in the US rose to a surprisingly strong 214,000 in February against the 190,000 the market had expected. Investors will be keen to see if Friday’s Non-farm payrolls report can show a similarly strong view of the US job market, as any figures above expectations could increase the possibility of Fed rate hikes this year. The strong ADP report didn’t translate into Dollar strength against the Pound however as Cable continued on its recent upward trend. EURUSD continued its pattern from the previous day as the pair traded sideways yesterday, closing fractionally higher at 1.08681.   

The Euro closed just over 1.0% lower yesterday as it dropped to 1.2961 against Sterling.  Euro Producer Price Index data, the change in prices received by domestic producers of commodities in all stages of processing (crude materials, intermediate materials and finished goods), printed lower than expected. Markit services PMI and Markit PMI composite data are due this morning, expectations are for 53 and markit composite is anticipated to be at 52.7. Usually a result above 50 is bullish for the Euro, but even a better than expected number would do little to dampen demand for further easing from the European Central Bank.

Data to watch: 8.55am German Markit Services PMI (Feb). 9am Eurozone Markit Services PMI (Feb). 9.30am UK Markit Services PMI (Feb). 1.30pm US Initial Jobless Claims. 2.45pm US Markit Services PMI (Feb). 3pm US ISM Non-manufacturing PMI (Feb).

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