Services Stop Improving in EZ and UK

Last updated 7/3/2009 5:05 AM EST (GMT -5) 5 Comments

Boris Schlossberg

Director of Currency Research, GFT

Both EZ and UK services PMI printed slightly weaker than the prior month’s results indicating that the economic recovery story in Europe may be running out of steam as we head into the second half of the year. EZ PMI was 44.7 a tad better than 44.5 eyed, but worse than the 44.8 reading in May. The UK number was 51.6 below the 51.8 consensus estimates and worse than May's 51.7 print.

The data suggests that the strong rebound in economic activity Q2 which came from very low levels in Q1 may be losing momentum as final demand continues to lag. One piece of news that should worry the recovery bulls is the fact that the new orders component in UK Services PMI report has once again slipped below the 50 boom/bust line.

Overall the data indicates stability, but little further improvement in both EZ and UK and does not augur well for risk currencies. Both EUR/USD and pound were lackluster in post announcement trade with euro struggling to hold 1.4000 while cable plumbed the bottom of the day’s range at 1.6350

Comments (5)

ChrisEccles

July 03, 2009 at 05:16 AM ET

Hi Boris
I remain intrigued by the bullish/ranging behaviour of EURUSD over the past few weeks.
Kathy's analysis of June 29 gave the single currency the highest overbought status
against the USD, weighting at 20%, which is VAST.
I doggedly hold my swing short on the pair, at least for now, and I believe that H2 of 2009 will
see the rose-coloured spectacles finally removed from the eyes of Euro bulls ! ! !

Really appreciate yours and Kathy's insights, Boris.

Best wishes

Chris Eccles

bschlossberg

July 03, 2009 at 05:29 AM ET

Thanks for the kind words. I too am bearish euros for intermediate term given the slowdown in the recovery dynamics

S_FX

July 03, 2009 at 05:49 AM ET

Hi Boris,
Do you see the Euro making one last push for the 1.4200 resistance areas if the 1.4000 holds, and backed by the somewhat stable data, or you think it has run out of steam and we are in for a downward correction? I'm looking to perhaps ride the 4HR channel as it is currently at the support line and both Stochastic and RSI are showing upward movement.

Appreciate the comment

Simon

bschlossberg

July 03, 2009 at 06:49 AM ET

Simon as I said in my daily a lot will depend on earnings next week. My sense is that risk aversion has the upper hand now, but as always we go day by day :)

S_FX

July 03, 2009 at 07:15 AM ET

Thank you for the comment
I got in on the 4HR support looking for around 50% retrace of yesterdays drop so we'll see how it goes :)
Wish you guys all the best for the 4th of July and keep up the good work

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.