Action Insight Mid-Day Report Yen Surges after Poor Services and Job Data from US
Japanese yen strengthens across the board today after another round of poor services data from around the world. Released in US session, ISM non-manufacturing index dropped to record low of 37.3 in Nov, suggesting contraction in services section is accelerating. Price paid index dropped sharply from 53.4 while employment component also dived further in sub-50 region from 41.5 to 31.3. Also released from US, ADP employment showed largest contraction since 1991 by -250k in Nov. Challenger planned job cut rose 148% to over 181k in Nov, hitting the highest level in six years. While most major currencies, except dollar and yen, remains weak, there is another round of free Canadian selling in early US session, dragged down by crude oil's fall to below 46 level. Though, EUR/USD and AUD/USD remains in range so far. Market's focus will turn to Fed's Beige book later in US afternoon as well as RBNZ's rate decision in the coming Asian session.
UK services PMI surprised on the downside to 40.1(consensus: 41.2, Oct: 42.4), the 7th straight month of contraction and the lowest level since the index began in 1996. Readings of employment, incoming new business, outstanding business and business expectation were all at record lows. Earlier this week, the UK reported manufacturing and construction PMI whose declines were sharper than market anticipated. Poor data indicated weak economic conditions in the nation and underscored BoE's aggressive rate cut in the meeting tomorrow. Markets expect another 100bps cut but the BoE might surprise the market again by a deeper cut.
Other data saw retail sales in Eurozone shrank -0.8% in October, worse than consensus of -0.4% and 0% (revised from -0.2%) in September, amid rising unemployment and weakening consumer confidence. On annual basis, the figure came in at -2.1%, also lower than market's expectation of -1.4%. September figure was also revised upward to -1.4%. Sales of food, drinks and tobacco products fell 0.5% that of non-food products lost 0.9% in October.
Eurozone revised down the final number for November's services PMI to 42.5 from 43.3 initially. Falling from 45.8 in October, the figure marked the sharpest drop in 10 years and the 6th consecutive month that the sector is in contraction. Composite PMI for November also fell more than expected to record low at 38.9 from 43.6 in October. Moreover, the German figure was also revised to 45.1 from 46.2, compared with 48.3 in October. Readings for new business, input and output all dropped sharply.
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