- ISM non-manufacturing PMI up from 54.8 to 57.2 vs. 55.3 forecast
- U.S. labor market conditions index up from 1.4 to 1.5 in Nov
- U.S. final services PMI downgraded from 54.7 to 54.6 vs. 54.9 forecast
- Eurogroup: Greek debt to be restructured?
The euro was the star of the forex show as it extended its climb from the previous session on talk of Greek debt restructuring.
Mostly strong U.S. data and hawkish rhetoric – Economic data from the U.S. continued to impress, as the ISM non-manufacturing PMI jumped from 54.8 to 57.2 in November, outpacing the 55.3 forecast and reflecting a faster pace of industry expansion.
Components of the report indicated a large improvement in business activity and production, employment, supplier deliveries, imports and new export orders. However, Markit’s final services PMI for the same month was downgraded from its initial 54.7 reading to 54.6 instead of being upgraded to the 54.9 consensus.
Meanwhile, the labor market conditions index, which is a composite reading based on 19 employment indicators, ticked up from 1.4 to 1.5 in November to show an overall improvement in the jobs situation for the third month in a row. Fed official Evans noted that these improvements suggest that that there’s less need for fiscal easing or explicit infrastructure stimulus but that they’d wait and see what the new U.S. administration has in mind before making further monetary policy changes.
For FOMC member Dudley, it’s important that monetary and fiscal stimulus are well aligned. He pointed out that it’s still too early to tell how Trump’s fiscal policy could influence the Fed’s biases but that he favors gradual interest rate hikes. He also expressed his support for Yellen, adding that she should serve her full term as Fed Chairperson under the new presidency.
Easing fiscal and political jitters in the euro zone – All that talk about a potential banking crisis in Italy led traders to pay closer attention to debt-related updates in the euro zone these days. As it turns out, French Finance Minister Michael Sapin shared that Eurogroup leaders will be discussing short-term measures to ease the burden on Greece after its government committed to carrying out economic reforms.
“As Greece sticks to its agreements, Europe must also stick to the agreements it made with Greece,” Sapin said. Recall that Greece’s creditors have yet to assess whether or not Greece is able to fulfill its promises of getting its financial act together as part of the third bailout package it secured.
In Italy, Prime Minister Renzi gave in to a request by President Mattarella to delay his resignation until the budget is passed. This gives the government time to iron out its finances before having to pick a new PM or call for early elections.
Major Market Movers:
EUR – Euro bulls kept on charging for the rest of the day but it was forced to retreat against some of the commodity currencies.
EUR/USD advanced from 1.0655 to a high of 1.0797, EUR/JPY is up from 121.80 to a high of 123.20, EUR/GBP popped up from the .8400 handle to .8480, and EUR/NZD found resistance near 1.5100 then fell to a low of 1.5027.
- 12:30 am GMT: Australian current account balance
- 3:30 am GMT: RBA interest rate statement (See Forex Gump’s preview here!)
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