Market Drivers for March 5, 2014

UK PMI Services bit better at 58.2 vs. 58

EUR Retail Sales

Nikkei 1.20% Europe -.11%

Oil $103/bbl

Gold $1335/oz.

Europe and Asia:

AUD GDP 0.8% vs. 0.7%

GBP UK Pmi Services 58.2 vs. 58.0

EUR Retail Sales


North America:


USD ISM Services 10:00 AM

Risk appetite continued in the currency markets as fears over the Russia/Ukraine conflict receded and traders focused on better than expected economic data out of Australia, UK and the EZ.

The situation in Crimea remained tense, with latest reports by Interfax agency suggesting that Russian forces seized two Ukrainian missile defense units, but currency markets were nonplussed by the events as the prospect of further military encroachment into Ukraine looked less likely after yesterday remark by Vladimir Putin. Mr. Putin’s assurance that Russia did not want to annex Crimea or eastern parts of the Ukraine has convinced traders that the situation remains contained for now.

Although most of the major currencies remained relatively flat in Asian and early European trade, yen crosses all rallied with USD/JPY itself rising to a high of 102.44 by mid morning London dealing.

The economic data overnight was generally supportive with Australian GDP beating expectations by printing at 0.8% versus 0.7% eyed. The results were solid with main contribution coming from net exports and consumer expenditure. Mining was up 1.2% while rental hiring and real estate sectors added a very strong 4.2% on the period prior. Overall the data from Down Under will keep RBA stationary and should keep Aussie supported at these levels. The pair initially spiked to 8999 on the news but found offers at the 9000 level and receded as resistance at that key figure remains strong.

In UK the PMI Services report printed at 58.2 versus 58.0 forecast. This was slightly lower than last month’s reading of 58.3 and the lowest gage since June of 2013, but still well above expansionary levels. The PMI data suggests that UK economy is set to grow at 0.7% q/q rate in Q1 this year as it remains one of the best performing economies in the G-10 universe. Cable rose to a high 1.6692 but failed to clear the 1.6700 level for the time being.

In Europe the Retail Sales data also surprised to the upside rising 1.6% against 0.9% forecast, but the news failed to move the EUR/USD as the pair remains contained in the 1.3700 -1.3750 range. All eyes are now focused on tomorrow’s ECB meeting, although given the relatively buoyant recent data sets that showed continued strength in Germany and improvement in economic activity in Spain, the prospect of any surprise easing action by the ECB remains remote.

Overall the eco data from overnight continues to suggest that despite weather woes and geopoltical conflicts global growth remains solid and steady. If today’s US data which includes the ADP report and the ISM Services release comes in line – it should further confirm that thesis and will likely help to push risk trades higher with USD/JPY taking out the 102.50 barrier and lifting yen crosses with it.

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