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The Euro-zone PMI services-sector index was revised higher to 50.5 for the final reading from the flash estimate of 50.3 with the composite output index at 53.8. There was a strong recovery for the services-sector index, but the Italian sector contracted at a faster pace.

The dollar posted net gains to 2-week highs in early Europe on Wednesday with the Euro dipping below 1.2000. It did recover some ground ahead of the US open, but was unable to make significant headway. ECB chief economist Lane stated that the acceleration of vaccines and locking of economies is built into ECB forecasts.

ADP data recorded an increase in private-sector payrolls of 742,000 for April, below consensus forecasts of 800,000, although there was an upward revision to the March increase to 565,000 from the original estimate of 517,000. Markets expect another strong employment report on Friday.

The PMI services-sector index was revised to 64.7 from the flash reading of 63.1 and this was the strongest reading since the data series began in late 2009.

The ISM services-sector index declined slightly to 62.7 from 63.7 and below markets expectations of 64.0, although this was still a historically strong rate of growth. There was also a slowdown in the rate of growth in new orders and business activity. There was, however, a faster rate of employment growth for the month while prices increased at the fastest rate since July 2008 with increases across all industry sectors.

The data did not shift the US narrative significantly with expectations of strong growth and rising inflationary pressures. The Euro found further support below 1.2000, but failed to pull away from this level and settled just above this level in early Europe on Thursday as a 3.0% increase in German factory orders provided some support.




The dollar edged higher ahead of the New York, but was unable to test the 109.50 area and edged lower after the Wall Street open. There was little overall move in Treasury markets which stifled activity despite a barrage of Fed rhetoric.

Chicago Fed President Evans stated that there was quite a long way to go before reaching goals and that policy was likely to be on hold for some time. He did state that the employment mandate was in sight which could be seen as a more hawkish shift, although he also stated that achieving the inflation goal may prove more difficult. He also stated that there would be no problem with a 3% inflation rate.

Boston head Rosengren stated that there was still significant slack in the economy and that the most likely outcome is that inflation will stabilise around 2.0%. He added that it was too early to talk about tapering bond purchases. Cleveland President Mester added that progress in the labour market does not meet Fed goals and there would be no reaction to strong data in the absence of inflation pressure. Given that these two members are on the hawkish end of the spectrum, the comments were broadly dovish. Overall, the dollar consolidated around 109.25 and edged higher to the 109.40 area in Asia on Thursday.




Sterling held a firm tone during European trading on Wednesday with expectations that the Bank of England would take a more optimistic outcome over the outlook in Thursday’s policy statement. The potential Sterling support was offset by political uncertainty and caution ahead of key events which also tended to dampen activity with the UK currency held in relatively tight ranges.

Global risk appetite held firm which helped limit the potential for selling pressure on the Sterling and the currency maintained a firm underlying tone.

The UK currency attempted to hold above 1.3900 against the dollar while the Euro retreated to near 0.8625. Markets expect that the Bank of England will hold interest rates at 0.1% and could announce a tapering of bond purchases while growth projections are likely to be upgraded, but caution is also likely to be a feature.

Sterling was held in narrow ranges on Thursday and settled close to 1.3900 against the dollar while the Euro recovered slightly to 0.8635.




Swiss consumer prices increased 0.2% for April with the year-on-year rate at 0.3% from -0.2% the previous month and in line with consensus forecasts. The primary influence was the base effect from sharp price declines last year. Global inflation developments are likely to be more important than domestic developments for near-term market moves with higher international pressures tending to support the Swiss currency

The Euro was unable to make any headway and retreated to near 1.0960 while the dollar ended little changed around 0.9130 before a marginal advance on Thursday.



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