Middle East Tensions Continue to Hurt the Dollar
The Euro continued to grind higher and pushed through 1.3855 resistance, as strong indications of a potential rate hike are backed by recent economic data. The higher euro zone manufacturing PMI readings yesterday have been followed by news of a larger than expected jump in January producer prices. The 1.5% m/m increase was half again as much as the consensus forecast and lifts the year-over-year rate to 6.1%, the fastest since Sept 08. The ECB meets tomorrow. The market will also need to absorb EMU PMI Services (9300 GMT) and EMU GDP (10:00 GMT). A surprise to the market could come in the form of a better than expected GDP figure. PMI data has been robust for a while, but GDP has been relatively weak.
Similar issues are evident in the UK. Yesterday’s record high manufacturing PMI reading has been followed by a stronger than expected construction PMI. The 56.5 reading was driven by the growth of new business compares with 52.8 consensus forecast after a 53.7 reading in January. It is the strongest construction PMI since last June. The PMI for services, which accounts for a much larger part of the economy, will be reported tomorrow at (930 GMT). Expectations are for at reading of 54.3. The pound broke through to the upside and is likely to gain ground.
In the US, better than expected ADP Employment data, which helped lift the equity markets, but failed to help the dollar. Private-sector jobs in the U.S. rose by 217,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. Economists had expected ADP to report a job gain of 170,000 in February. The January data were revised to show a rise of 189,000 versus the 187,000 increase first reported. Tomorrow the Department of Labor will release employment claims (1330 GMT). The markets will highly await Friday’s employment report.
