Market Drivers June 5, 2013
AU GDP misses Aussie back below 9600
UK PMI Services better cable eyes 5400
Nikkei -3.83% Europe -0.38%
Oil $93.83/bbl
Gold $1398/oz.

Europe and Asia:
AUD GDP 0.6% vs. 0.8%
AUD AiG Performance of Service Index 40.6 vs. 44.1
EUR GDP -0.2% vs. -0.2%
EUR German PMI Services
EUR Euro-Zone PMI Services 47.2 vs. 47.5
EUR Euro-Zone Retail Services -1.1% vs. -1.0%
GBP PMI Services 54.9 vs. 53.0

North America:
USD ADP Employment Change 8:15
USD Factory Orders 10:00
USD ISM Non-Manufacturing Composite 10:00
USD US Fed Reserve Releases Beige Book 14:00
CAD Building Permits 8:30

Its been a night of divergent price action in high beta FX with Aussie sinking to fresh weekly lows while cable rose to new highs as data Down Under disappointed while UK news delighted investors. In Australia both the PMI Services report and the GDP data missed the mark.

AIG Services PMI came in at 40.6 versus 44.1 – deep in contraction territory and its worst reading in more than a year. Furthermore the GDP data printed at 0.6% versus 0.8% expected as capital investment waned. Indeed without 1.0% contribution from export growth AU GDP would have actually been negative this quarter.

The news only exacerbated market concerns that the RBA may lower rates once again in order to prop up the softening Australian economy. The Aussie tumbled through the .9600 barrier and remained weak in Asian and early European dealing nearing the .9550 mark. So far the pair has been able to hold above the key .9500 level, but if it sees further selling in North American trade, the Aussie could test that key support as the day progresses.

The news was diametrically opposite in UK, where the PMI services report completed the trifecta of upward surprises this week. UK PMI services rose to 54.9 versus 53.0 – its best showing in more than a year.The figure was helped by better weather and was boosted by a rise in new orders which hit their highest level since February 2010.

This was the third positive report out of the UK economy this week, providing a lift to cable longs as fears of additional QE measures by the BOE have been allayed for the time being. Sterling rose to a high of 1.5375 before settling down a bit, but the pair remains well bid and could make a run for the 1.5400 level later in the day.

In North America today, all eyes will be on the ADP report and the ISM Services data. The dollar has been trading on US fundamental news rather than risk flows for the past several months, so today’s releases are likely to be key. The market anticipates a reading of 165k for ADP and 53.5 for ISM Services, but given the upwards creep in weekly jobless claims the prospect of a downside miss is quite real.

If the data does disappoint the EUR/USD is likely to test resistance at the 1.3100 level once again The pair has failed at that figure several times this week, but any downbeat US data report could finally push it through that key resistance level as traders sell the greenback on loss of hope of any near term Fed tapering.

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