Economic Data Key on Wednesday

Europe is poised for a slightly positive start on Wednesday as investors look to the deluge of economic data to provide the next catalyst for the markets.

Revised services PMI readings for the eurozone countries and the U.K. will be released throughout the morning. The services sector, in general, hasn’t fared as badly as manufacturing so the figures should be much more positive and point to strong growth expectations in most cases.

The U.K. figure in particular is expected to remain very high at 58.1 which is important given both the country’s dependency on the sector to provide more than two thirds of economic output and because other sectors are not pulling their weight. Manufacturing is suffering as a result of the strength of the pound which construction isn’t really contributing to growth at the moment, according to second quarter GDP data. This puts even greater importance on the services sector to keep the U.K. economy ticking along.

Eurozone retail sales data will follow the PMI readings and is expected to show a slight decline of 0.2% in June. These numbers can be quite volatile and therefore there is probably little to be read into today’s release, assuming of course that we don’t see a big difference between the expected and final reading.

The constant data flow continues into the U.S. session, with the ADP non-farm employment change number being released ahead of the Wall Street open. This is intended to be an estimate of the official non-farm payrolls figure which will be released on Friday but often the reality is that it is a poor approximation. It may become more accurate after all of the revisions are taken into consideration but at this point it’s no longer relevant. The only use people really get from it is when there are big unexpected swings in the number that suggest expectations for Friday’s release are well off.

We’ll also get the final services and ISM non-manufacturing PMI readings today, both of which are expected to remain well into growth territory at 55.2 and 56.3, respectively. As with the U.K., the services sector is very important to the U.S. economy and with it suffering the same problems with a strong currency, this makes the reliance on the services industry even greater.

Also key today will be crude oil inventories given the focus that there’s been on the commodity market as of late. Oil has found itself trading close to this year’s lows on the back of new supply growth from the U.S., increased output from the Saudi’s, the removal of sanctions on Iran and demand concerns in China. Last week we saw a surprisingly large draw in inventories which gave oil prices a temporary boost. We’re expecting another small reduction today but given the levels oil finds itself at, we could get some volatility when this number is released. A large build could be enough to prompt a move back towards those January lows.

For a look at all of today’s economic events, check out our economic calendar.

If you would like to discuss any points further, please contact me on 07970 073088.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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