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The Euro-zone services index was revised down to 53.1 for the final reading from the flash reading of 53.3 with both the Italian and Spanish readings below expectations, although both were in comfortable expansion territory while the German sector remained in contraction.

ECB council member Kazaks stated that an interest rate increase was possible in early 2023 and that the central bank is ready to cut policy stimulus if necessary.

The dollar was unable to gain traction into the New York open with a reluctance to sell the Euro as it edged above 1.1300 against the dollar.

ADP reported an increase in private-sector payrolls of 807,000 for December from a revised 505,000 the previous month. The increase was more than double consensus forecasts of 400,000 and the strongest reading for seven months. The data boosted confidence in the labour market ahead of Friday’s employment report.

The dollar secured only brief support from the stronger than expected jobs data and dipped lower after the Wall Street open.

European equity markets outperformed US markets which provided an element of Euro support and it advanced to near 1.1350.

Minutes from December’s Federal Reserve meeting indicated that inflation concerns had increased. Most participants also considered that prerequisites for a rate hike could be met relatively soon if the recent pace of labour-market improvement continued. There was still a wide range of views and some members considered that structural deflation pressures could return. The overall tone was, however, hawkish and there was a shift in money markets with futures pricing in an 80% chance of a rate hike at the March meeting. The dollar posted gains following the minutes with the Euro dipping towards 1.1300. Commodity currencies remained on the defensive on Thursday amid less confident risk conditions. The Euro was able to demonstrate some resilience but traded just below the 1.1300 level.




According to media reports, the Bank of Japan will revise up its inflation forecast for the coming fiscal year. There were still expectations that the Bank of Japan would maintain a very expansionary monetary policy which limited any potential yen support.

US Treasuries lost ground following the US jobs data with higher yields providing an element of dollar support, although it was held below 116.00 against the yen while the Japanese currency lost ground on the crosses. Wall Street equities dipped sharply following the minutes as risk appetite deteriorated while there was a further increase in the 10-year bond yield to the highest level since March and the dollar edged back above 116.00 amid wider gains.

The Chinese Caixin PMI services index strengthened to 53.1 from 52.1 previously and above expectations, but the positive impact was offset by reservations over coronavirus developments within China. Risk appetite remained vulnerable in Asia with some yen support, although Chinese equities were resilient. The Bank of Japan made substantial cash injections during the session to combat a spike in yields and the dollar traded around 115.90 against the yen with the Euro just below 131.0.




Sterling held a firm tone into Wednesday’s New York open with underlying support from higher money-market yields while risk conditions were little changed.

Prime Minister Johnson confirmed that there would be tightening of coronavirus restrictions in England and no need for further lockdown measures. There was an element of optimism that high immunity levels through infections and vaccination boosters would help curb the spike in cases. In this environment, there was speculation that the UK economy could out-perform the Euro-zone. There were further gains for UK equities which helped underpin Sterling confidence during the day. The UK currency secured a further advance to touch 1.3600 against the dollar while the Euro secured a tepid recovery to the 0.8350 level.

Sterling retreated against the dollar after the Fed minutes, especially with a slide in risk appetite, but it held a firm overall tone. There was a further net retreat on Thursday as risk appetite remained vulnerable, although it did hold above 1.3500 against the dollar with the Euro around 0.8355.




The Swiss franc was unable to make headway during Wednesday with the Euro posting a significant advance to around 1.0385 while the dollar settled little changed around 0.9160. The franc was undermined by expectations of higher yields elsewhere with the National Bank expected to maintain a very expansionary policy.  

Risk appetite deteriorated after the Fed minutes, although the Swiss currency failed to secure significant support with the Euro able to hold around 1.0380 while the dollar secured net gains to around 0.9190 as traders monitored equity market developments and trends in bond yields.


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