DailyFX European Market Wrap: Service Sector PMIs Weaken
The Christian festival of Pentecost has the German markets out today, but there has still been economic data published in Germany showing a buoyant service sector.
Markets looked past the Service PMIs to trade lower after the record highs on Friday last week in both Germany and the UK. Miners lead the declines as industrial metals are lower on the day. Despite the service data being in the background it does cause an extra headache for the European central bank which meets on Thursday to decide on Eurozone interest rates. While no rate rise is expected the fact that Germany continues to power ahead shows that its economy needs a slightly tighter monetary policy. Something other Eurozone economies could not contemplate.
Despite this the EUR/USD is showing no signs of letting up. Today’s price action is providing an opportunity to buy the dips Meanwhile in the UK the service sector has shown particular weakness. It’s important as the UK service sector accounts for 80 percent of the country’s GDP. Today’s number was down from the nine month high of 55.8 in April to a worse than forecast 53.8 in May.
Despite this and the terrorist activities in London over the weekend Sterling is erasing some of the recent losses. But the big event risk is on Thursday with the UK general election.
Oil has been on the move today, initially seeing gains following statements from Saudi Arabia, Bahrain, the United Arab Emirates and Egypt all saying that they will suspend air and sea travel to and from Qatar, because of escalating tensions that started over Qatar’s relationship with Iran and support of the Muslim Brotherhood.
Most of the gains seen earlier in Asian trade had evaporated and price action is now suggesting the lower trending oil market may prevail. Finally a look ahead to two trades to watch out for on Tuesday.
A potential for a move later in the day for the Aussie dollar as the Reserve Bank of Australia announces its latest decision on interest rates. No change expected from the current level of 1.5%. Then it’s Eurozone retail sales numbers.. ahead of that ECB rate decision on Thursday.
--- Written by Jeremy Naylor, DailyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.