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The pound took a heavy hit during today’s morning London session, apparently as a reaction to the U.K.’s disappointing services PMI report.

The risk-off vibes and pullback in bond yields, meanwhile, apparently allowed the yen to pull ahead of its peers.

  • Spanish services PMI: 56.9 vs. 55.2 expected, 54.6 previous
  • Italian services PMI: 57.7 vs. 56.1 expected, 55.4 previous
  • French final services PMI: 59.2 vs. unchanged at 59.3 expected
  • German final services PMI: 57.3 vs. unchanged at 57.0 expected
  • Euro Zone final services PMI: 58.0 vs. unchanged at 57.6 expected
  • Euro Zone Sentix investor confidence: 31.9 vs. 33.2 expected, 32.9 previous
  • U.K. services PMI: 53.0 vs. 54.1 expected, 54.2 previous
  • Euro Zone retail sales m/m: -1.1% as expected vs. 2.0% previous

Major Events/Reports PMI

The U.K.’s services PMI for the January period was released earlier during the session.

And unfortunately for pound bulls, the reading dropped from 54.2 to a 16-month low of 53.0, which is a sharper drop compared to the consensus that the reading will only tick lower to 54.1

Scanning through the report, Markit attributed the weaker reading on “relatively weak gains in new work.”

And that, in turn, was blamed on “the loss of existing clients and lingering concerns surrounding the UK’s exit from the EU” (i.e. Brexit).

More importantly (for rate hike junkies), “selling prices were raised as companies attempted to protect profit margins given strong upward pressure on cost burden.”

Unfortunately for pound bulls, however, the rise in “the rate of charge inflation softened to a four-month low.”

And according to survey respondents, “charge inflation was curbed by competitive conditions.”

Intense risk-aversion to start the week

Europe is starting the new trading week on a really gloomy mood since the major European equity indices were broadly and deeply in the red.

Aside from risk sentiment spillover from the earlier Asian session, market analysts blamed the risk-on vibes on last week’s broad themes, namely the ongoing narrative that the major central banks will supposedly be tightening monetary policy soon, which stoked fears that credit conditions will tighten and slow down growth.

  • The pan-European FTSEurofirst 300 was down by 1.39% to 1,502.30
  • Germany’s DAX was down by 0.94% to 12,664.50
  • The blue-chip Euro Stoxx 50 was down by 1.32% to 3,478.50

U.S. equity futures were also broadly in negative territory, which implies that the risk-off vibes may spill over into the U.S. session.

  • S&P 500 futures were down by 0.53% to 2,742.25
  • Nasdaq futures were down by 0.69% to 6,709.00

Global bond yields fall

After climbing earlier, global bond yields broadly reached a ceiling and then went in the opposite direction, with European bond yields leading the downhill charge.

  • German 10-year bond yield down by 4.61% to 0.724%
  • French 10-year bond yield down by 5.16% to 0.980%
  • U.K. 10-year bond yield down by 1.58% to 1.554%
  • U.S. 10-year bond yield down by 0.71% to 2.832%
  • Canadian 10-year bond yield down by 0.21% to 2.357%

Major Market Mover(s):


The pound’s price action was steady for the most part during the earlier Asian session.

However, that changed when the U.K.’s disappointing services PMI report was released during the morning London session, which enticed sellers to launch an attack and push the pound lower.

In fact, the pound is not just the worst-performing currency of the session – it’s also the weakest currency of the day (so far).

GBP/USD was down by 53 pips (-0.38%) to 1.4036, GBP/JPY was down by 73 pips (-0.47%) to 154.13, GBP/CHF was down by 44 pips (-0.34%) to 1.3078


The intense risk-off vibes during the session and the pullback in global bond yields likely gave the yen enough of a boost to finish the session on a higher note across the board.

USD/JPY was down by 10 pips (-0.09%) to 109.80, CAD/JPY was down by 21 pips (-0.24%) to 88.25, CHF/JPY was down by 17 pips (-0.15%) to 117.83

Watch Out For:

  • 2:45 pm GMT: U.S. final services PMI (no change from 53.3 expected)
  • 3:00 pm GMT: ISM’s non-manufacturing PMI (56.5 expected, 55.9 previous)
  • 4:00 pm GMT: ECB Overlord Draghi will testify before the European Parliament