We started the new year with a bout of risk aversion as events in Tehran escalated and Chinese authorities seized trading earlier in the week. This led to EUR/USD and USD/JPY declining and breaking key psychological levels over the course of yesterday’s trading session. On the docket we were greeted by some key high tier data from the Eurozone and UK early yesterday morning.
Firstly, Eurozone CPI posted a worse than expected figure of 0.2%. Inflation in the Eurozone was forecast to rise to 0.4% as prices rise in the service sector. However CPI has remained at 0.2% year on year and therefore still short of the ECB’s desired rate of just under 2%. Meanwhile, the UK released another high tier piece of PMI data yesterday morning. Construction PMI in the UK registered a bullish 57.8 against a forecast 56.1. Construction companies ended 2015 with a robust and accelerated expansion of overall business activity and this trend seems to have continued into the new year.
Busy day ahead with the main focus on the FOMC minutes which are released after the European markets close. The minutes will be deciphered for clues on when rates could go up again in the US. Other key data include the UK PMI Service reading which is the dominant sector in the UK (roughly 75% of economic activity). The ADP unemployment report will give the market an early indication of how the all-important US employment data could look on Friday.