London Session Recap

EUR/USD is trading very little changed from its US close. The move back into USDs that was prompted by the disappointing US payrolls data was extended into Asian hours initially. However, EUR buyers emerged below 1.3950 pushing the EUR moderately higher and back to the 1.4000 level. Final Eurozone June services PMI registered a better than expected 44.7, soothing the economic outlook a touch. However, this data does not change the view that the pace of activity in the Eurozone continued to deteriorate in Q2 albeit at a slower pace.

Stronger data came in the form of the UK June services PMI which held close to the previous month’s level at 51.6. This number is evidence of expansion in the sector and will help to revive hopes that the UK economy may see growth during Q4 this year. The data, however, failed to lift the pound. Cable had found sellers early on in London hours, dropping from the 1.6420 area back to 1.6340. EUR/GBP also pushed higher reflecting the fact that after a decent rally, sterling upside momentum is drying up on a rise in scepticism about growth prospects in the broader global economy and in the UK. Other UK data showed that housing equity withdrawal went into reverse in Q1 to the tune of GBP8.0 bln. This shows that consumers were paying back housing debt rather than using their homes as collateral for increasing expenditure and is suggestive of low confidence levels. Stronger data both in the US and in the UK will likely be needed before sterling can rally from current levels.

Despite the cautious outlook with respect to risk the AUD has climbed higher vs the USD supported by a rise in the AiG services index to 50.2. These data indicate expansion in the sector for the first time in 15 months.

EUR/CHF found solid support at the 1.5180 level overnight after yesterday’s rally ran out of steam. The downside is protected by wariness about further intervention from the SNB. However, the SNB has been emphasising that it wants to prevent CHF gains and has not suggested it wants to weaken the CHF. Therefore CHF buying will likely be seen again towards the 1.5250 recent high.

The US market is closed today in lieu of the July 4 holiday.

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