Dollar remains generally in range after mild disappointment from US ADP private employment report. On the other hand, while major currencies continue to consolidate against dollar and yen, Sterling is leading the way and strengthens in general after a string of solid economic data from UK today. But after all, the strength in pound is so far mild and the overall market may continue to consolidate ahead of tomorrow's key event risks of ECB and BoE as well as Non-Farm Payroll on Friday.
The ADP employment report showed -371k contraction in the private job market in July versus expectation of -335K. Challenger reported showed employers announced -5.7% less job cuts in July than a year ago. The Non-farm payroll report to be released on Friday, is expected to show -345K job cuts in July while unemployment rate is expected to jump to 9.6. Focus for today will turn to ISM non-manufacturing index which is expected to rise from 47 to 48 in July. Factory orders is expected to be flat in June.
Quick update: ISM Non-manufacturing index disappointed markets by dropping to 46.4 in July unexpectedly. Weakness is seen across components, in particular with price paid dropped form 53.7 to 41.3. Exports also dropped from 54.5 to 47.5. Meanwhile, the employment component also retreated back from 43.4 to 41.5. On the other hand Factory Orders unexpectedly rose 0.4% in June.
The string of solid UK started started overnight as Nationwide consumer confidence rose more than expected to 60 in July, the highest level in a year. PMI services continued to stay above 50 for another month and rose much more than expected from 51.6 to 53.2, showing the biggest expansion in services industry in 18 months. Industrial production and manufacturing production both posted unexpected gain of 0.5% mom and 0.4% mom in June. Markets are speculating that BoE will end the five-month bond purchase program as more signs of recovery are seen. Focus will turn to BoE announcement tomorrow.
On the hand, economic data from Eurozone are disappointing. Retail sales unexpectedly dropped -0.2% mom, -2.4% yoy in June. Eurozone Services PMI was revised slightly up from 45.6 to 45.7 in July but that was overshadowed by downward revision of German Services PMI from 48.4 to 48.1.
GBP/USD Mid-Day Outlook
GBP/USD's rally resumes after brief consolidation and takes out 1.7003 to 1.7042 so far. At this point, intraday bias remains on the upside as long as 1.6886 minor support holds. Further rally should be seen towards 50% retracement of 2.1161 to 1.3503 at 1.7332. But upside momentum should diminish as GBP/USD approaches this level and we'll look for reversal signals then. On the downside, below 1.6886 will turn intraday outlook neutral again. But after all, another rise is still in favor as long as 1.6338 support holds.
In the bigger picture, there is no change in the broader outlook that rise from 1.3654 is the third leg of correction that started at 1.3503, which corrects the whole down trend from 2.1161. Such correction should be near to an end even though further rise would be seen after taking out 1.6742 high. Upside is still expected to be limited below 1.7332 as the correction is expected to conclude in resistance zone of 1.6428/7332 (38.2% and 50% retracement of 2.1161 to 1.3503). Decisive break of 1.6338 support will now be an important signal that indicates such consolidation is already finished and will turn medium term outlook bearish for a retest of 1.3503 low eventually.