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The Greenback staged a broad-based recovery during the morning London session and also happens to be the best-performing currency of the session.

The pound gave the Greenback  a run for its money, though thanks to the U.K.’s better-than-expected services PMI reading, which helped to stoke expectations for an August BOE rate hike, market analysts say.

Greenback and pound strength, meanwhile, likely weighed down on the euro, so much so that the euro found itself whimpering at the bottom of the forex heap.

As for other currencies of note, the comdolls are also worth highlighting since they were mostly weaker during the session. And we can probably attribute comdoll weakness to the Greenback’s strength since risk-taking was actually the dominant sentiment in Europe.

  • Spanish services PMI: 53.9 vs. 52.7 expected, 52.9 previous
  • Italian services PMI: 54.3 vs. 53.3 expected, 53.1 previous
  • French final services PMI: 55.9 vs. no change from 56.4 expected
  • German final services PMI: 54.5 vs. no change from 53.9 expected
  • Euro Zone final services PMI: 55.2 vs. no change from 55.0 expected
  • U.K. services PMI: 55.1 vs. steady at 54.0 expected

Major Events/Reports:

U.K. services PMI

Markit released the U.K.’s June Services PMI report earlier, revealing that the headline reading jumped to from 54.0 to 55.1, which is the best reading since October 2017. The upside surprise is made all the better because the consensus was that the headline reading would hold steady at 54.0.

Looking at the details of the report, the stronger-than-expected reading was due mainly to “the strongest increase in new work since May 2017.”

Survey respondents cited “successful product launches, new marketing initiatives and improving economic conditions” as the reasons for the stronger growth in new orders.

However, they also stated that “Brexit-related uncertainty had held back business investment, particularly in relation to spending by large corporate clients.”

With regard to inflationary pressure, the PMI report noted that “June data signalled a sharp and accelerated rise in average cost burdens.”

More importantly, higher staff salaries were cited as one of the reasons for the higher input costs. And the higher costs, in turn, “resulted in the fastest rate of prices charged inflation since March” as some companies passed on their greater costs to clients.

The only disappointing bit from the report was the finding that “Employment numbers increased only modestly in June, with the rate of job creation holding close to the 13-month low seen in April.”

Overall, however, the U.K.’s June services PMI report was pretty good, so much so that market analysts were saying that the report helped to lift expectations for a BOE rate hike this August.

Risk-taking persists in Europe

Risk-taking is still apparently the name of the game in Europe since most of the major European equity indices were flying high by the end of the session, while those that were still in the red were already off their intraday lows.

The major European equity indices actually had a weak start, though, likely because of risk sentiment spillover from the earlier Asian session since market analysts were still citing China’s ban on Micron Technology’s chip sales. Although lingering trade-related jitters were also cited as a general reason for the initial risk-off vibes.

As to what caused risk sentiment to recovery later, that’s not yet very clear. There was a (relatively) good news late into the session when China’s finance ministry announced the following ahead of this Friday’s tariff implementation:

“The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so”

However, the major European equity indices were already in recovery mode just over an hout before that announcement.

  • The pan-European FTSEurofirst 300 was already up by 0.19% to 1,490.29
  • Germany’s DAX was still down by 0.04% to 12,343.56 but off the day’s low at 12,299.11
  • The blue-chip Euro Stoxx 50 was already up by 0.24% to 3,414.85

U.S. equity markets will be closed for the Independence Day holiday, but it’s worth noting that U.S. equity futures also got a lift from the risk-on vibes in Europe.

  • S&P 500 futures were up by 0.29% to 2,721.00
  • Nasdaq futures were up by 0.35% to 7,048.50

Major Market Mover(s):

USD

The Greenback bounced back during the morning London session after getting whipped during the previous sessions.

There was no apparent trigger for the Greenback’s recovery, but some market analysts suggest short-covering and/or range-trading because of the Independence Day holiday in the U.S. and ahead of tomorrow’s Fed meeting minutes.

USD/CAD was up by 20 pips (+0.15%) to 1.3147, USD/CHF was up by 19 pips (+0.20%) to 0.9930, USD/JPY was up by 13 pips (+0.12%) to 110.50

GBP

The pound gave the Greenback a good fight but lost out in the end. Second place ain’t too shabby, though.

Anyhow, the pound found buyers across the board when the U.K.’s services PMI report was released earlier since, as noted earlier, the better-than-expected reading and net positive details apparently helped to drive up expectations for a BOE rate hike by August.

GBP/USD was down by 10 pips (-0.08%) to 1.3212, GBP/AUD was up by 48 pips (+0.27%) to 1.7887, GBP/NZD was up by 41 pips (+0.21%) to 1.9540

EUR

The euro was the worst-performing currency of the morning London session.

There weren’t really any apparent catalysts, but the euro did weaken when the Greenback and then the pound strengthened, so capital flows towards those currencies (at the euro’s expense) likely weakened the euro.

And between the two, Greenback strength likely had more weight since most EUR pairs suffered the bulk of the losses at the start of the session when the Greenback appreciated across the board.

Other than that, market analysts also cited the Euro Zone’s June PMI report. The Euro Zone’s PMI reading was actually upgraded slightly from 55.0 to 55.2 but market analysts were focusing on the the finding that “Business expectations have moderated accordingly. June saw the survey’s gauge of future output expectations drop to a 19-month low.”

I’m not too convinced, though, since the euro actually had a mixed reaction to the PMI report. And as noted earlier, the euro suffered the bulk of the losses at the start of the session when the Greenback appreciated across the board.

EUR/USD was down by 42 pips (-0.36%) to 1.1637, EUR/CHF was down by 20 pips (-0.17%) to 1.1555, EUR/GBP was down by 27 pips (-0.31%) to 0.8807

Watch Out For:

  • Independence Day holiday in the U.S.A. today
  • No economic reports are on the docket for the upcoming U.S. session