Article Highlights

  • Swiss GDP q/q: 0.6% vs. 0.3% forecast/previous
  • German Services PMI inline with 52.1 forecast/previous; French Services PMI lower at 47.9 vs. 48.8 forecast/previous
  • European Services PMI lower at 51.1 vs. 51.4 forecast/previous
  •  U.K. Services PMI improves: 58.6 vs. 56.5 forecast, 56.2
  • European Retail Trade m/m: 0.4% vs. 0.5% forecast, -1.2% previous
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The main story of the morning is the euro, which is taking a solid beating across the board after mostly disappointing PMI data this morning.  The only positive take away is that most of the data points still show expansionary conditions (above 50 is considered expansionary, below 50 is considered contractionary) but almost every read is below both expectations and previous reads.

We also got disappointing retail trade data, which combined with the  weak PMI numbers paints a bearish picture for what we may hear from the European Central Bank on Thursday.  Euro traders already went into sell mode right from the London open, but it could bounce back after hearing disappointing reads from the services and retail sectors.

EUR/USD is down 49 pips (-0.40%) to 1.2331, EUR/JPY is down 52 pips (-0.36%) to 147.07, and EUR/GBP is down the most by 58 pips (-0.74%) to .7859

The British pound is seeing some love after its own services PMI data ticked higher and bouncing back from a two month decline in the data. This shows that the slow down may not be as bad as previously thought, which had forex traders buying more Sterling to push it to session highs:

GBP/USD is up 58 pips (+0.37%) 1.5692, GBP/JPY is up 78 pips (+0.42%) to 187.15, and GBP/AUD is up 82 pips (+0.44%) to 1.8595

The forex calendar for the Wednesday afternoon London/morning U.S. session is potentially volatile as we get the initial reads on U.S. employment conditions and a statement on monetary policy from the Bank of Canada.

At 1:15 pm GMT, we got the ADP employment survey for a private sector read on employment conditions.   ADP is a private payroll processor, so it uses data on about 400,000 business for its survey number and is sometimes viewed as a leading indicator for what we may see from the government’s Non-Farm Payrolls number on Friday.

The ADP number came out at a net gain of 208K, below both the 222K forecast and 230K previous.  The September number was revised down to 213K from 225K, and so far the initial USD reaction has been negative.  This data will be followed up by the final reads on non-farm productivity and unit labor costs and 1:30 pm GMT, but they are low tier events so the market continue to focus on the disappointing ADP number in the short term.

At 3:00 pm GMT, we’ll get the ISM non-manufacturing number (57.5 forecast vs. 57.1 previous) and the monetary policy decision from the Bank of Canada.The forecast is for the BOC to leave the overnight rate at 1.00% and it is the potential market mover this hour as it tends to spark fast but choppy price action.

And at 7:00 pm GMT, the U.S. Federal Reserve will release its Beige Book report, which is an anecdotal summary of economic conditions around the U.S.  This is a mid-tier event that usually doesn’t draw a big reaction, but when it does surprise the markets it can lead to big moves as with any Fed event. Stay frosty!

See also:

Asia Session Recap

U.S. Session Recap

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