EURUSD topped out at 1.3074 yesterday, and then collapsed back down to 1.2898 lows in the afternoon. Even though the pair managed to stabilize at depressed levels overnight, it seems inevitable that the selling pressure returns at some point. Yesterday’s Eurozone CPI estimate for December was in line with expectations at 2.8% (down from 3.0% in the month prior), but this moderation in inflation is unlikely to make the Eurozone’s challenges much easier. Unlike the difficulties being faced in the UK (weak growth and above-target inflation), the problem in the Eurozone is one of vastly divergent growth and inflation between individual member states. The difference in performance between Euro-area members was clearly underlined by the most recent unemployment figures for December – which saw Germany’s unemployment rate hit multi-decade lows of 6.8% while Spain’s rate surged to record highs above 22%. In the face of these problems, we expect EURUSD rallies to be capped above 1.3000.
After the UK construction PMI came out yesterday at a much better than expected 53.2 (compared to estimates of 51.5), and manufacturing PMI on Tuesday also beat expectations (49.6 versus 47.3 expected), today we will get the UK services PMI. Analysts are forecasting the December reading to moderate to 51.5 from 52.1 in the month prior, but unless there is a significant downside miss, the earlier surprises in manufacturing and construction should still keep sterling supported going forward.
This morning’s data schedule also includes Eurozone PPI and industrial new orders; but perhaps the most interesting releases are set for the afternoon session. In particular, the market will be eyeing the ADP employment report at 13:15 GMT for clues about Friday’s highly significant non-farm payrolls release; consensus is looking for 178k jobs added in Dec, down from the 206k added the month prior. There will also be the release of this week’s US jobless claims data, ISM non-manufacturing report, and Canada’s Ivey PMI.
After the UK construction PMI came out yesterday at a much better than expected 53.2 (compared to estimates of 51.5), and manufacturing PMI on Tuesday also beat expectations (49.6 versus 47.3 expected), today we will get the UK services PMI. Analysts are forecasting the December reading to moderate to 51.5 from 52.1 in the month prior, but unless there is a significant downside miss, the earlier surprises in manufacturing and construction should still keep sterling supported going forward.
This morning’s data schedule also includes Eurozone PPI and industrial new orders; but perhaps the most interesting releases are set for the afternoon session. In particular, the market will be eyeing the ADP employment report at 13:15 GMT for clues about Friday’s highly significant non-farm payrolls release; consensus is looking for 178k jobs added in Dec, down from the 206k added the month prior. There will also be the release of this week’s US jobless claims data, ISM non-manufacturing report, and Canada’s Ivey PMI.
By
M.Zohaib Gadit
Forex Trading Consultant
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