Service Sector PMIs Put the GBP, the EUR and the USD in the Spotlight

Dollar weakness continues in the early part of the day as the market focus shifts to today’s service sector PMI numbers…
Bob Mason
Forex Yearly

Earlier in the Day:

The economic calendar was on the busy side through the Asian session.

Australia 1st quarter GDP numbers and China’s Caixin Services May PMI provided direction in the early part of the day.

For the Aussie Dollar,

The Australia economy grew by 1.8%, year-on-year, in the 1st Quarter GDP, which was in line with market forecasts. The economy had grown by 2.3% in the 4th quarter. Quarter-on-quarter, the economy grew by 0.4%, coming up short of a forecasted 0.5%. The economy had seen a quarterly growth of just 0.2% in the 4th quarter.

According to the ABS,

  • Government spending was the main contributor to growth. Spending increased by 0.8% in the quarter and by 5.1% through the year.
  • Household spending slowed and contributed just 0.1% to growth. Household final consumption increased by 0.3% in the quarter and by 1.8% through the year.
  • Dwelling investments also impacted. Dwelling investments fell by 2.5% in the quarter and by 3.1% through the year.

The Aussie Dollar moved from $0.69937 to $0.70000 upon release of the figures that preceded China service PMI numbers.

Out of China,

The Caixin Services PMI slipped from 54.5 to a 3-month low 52.7 in May. According to the May Markit Survey,

  • News business increased at a more moderate, but still solid pace. New orders from abroad expanded at a slower pace.
  • Service companies continued to add to payrolls, though the pace of hiring eased in May.
  • Service sector companies reported the lowest degree of confidence since Jul-18.
  • At composite level, the PMI eased from 52.7 to a 3-month low 51.5

The Aussie Dollar moved from $0.70000 to $0.69985 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.14% to $0.7001.

Elsewhere,

At the time of writing, the Kiwi Dollar was up by 0.39% to $0.6634, while the Japanese Yen was up by 0.05% to ¥108.10 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a particularly busy day ahead on the economic calendar. Spain and Italy’s May service PMI numbers are due out in the early part of the session.

France, Germany and the Eurozone’s Finalized service PMIs are also due out along with the Eurozone’s April retail sales figures.

Barring material deviation from prelim numbers out of France and Germany, Italy service PMI and the Eurozone’s composite PMI will be the key drivers on the PMI front.

The Eurozone’s retail sales figures will also influence and will likely be EUR negative.

From elsewhere, private sector PMI numbers out of the U.S will have an impact on the pair as will any Beijing and U.S administration chatter on trade.

At the time of writing, the EUR was up 0.09% to $1.1262.

For the Pound

The UK’s May service PMI is due out later this morning. While forecasts for the PMI to hold steady at 50.9, an unexpected contraction would certainly impact the Pound.

Outside of the numbers, chatter from the UK Parliament and sentiment towards Brexit will continue to influence.

Macron continues to attempt to show strength in Europe, stating that the 31st October deadline should be Britain’s final deadline. Fortunately, for the British government and the rests of the EU, France is not the only member state with a say on this.

A no-deal Brexit remains the worst-case scenario for the Pound, leaving the race to become Theresa May’s successor the key driver near-term.

At the time of writing, the Pound was up 0.06% to $1.2705.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. ADP nonfarm employment change figures are due out ahead of service sector PMI numbers.

Alongside May’s employment numbers, the market’s preferred ISM non-manufacturing service PMI will be the key drivers.

Outside of the stats, trade war chatter will also provide direction on the day.

At the time of writing, the Dollar Spot Index was down 0.02% to 97.054.

For the Loonie

1st quarter labor productivity figures will provide direction later this afternoon.

We can expect crude oil inventory numbers and any trade war chatter to also have an impact on the day.

The Loonie was up by 0.12% to C$1.3378, against the U.S Dollar, at the time of writing.

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