European markets are set for more of the same this morning as there seems to be no resolve and markets continue to dip lower. Asian markets again were the catalyst, but it has been the Chinese currency rather than the equity market that has taken the full brunt of investor jitters. The Yuan fell to its lowest level against the greenback since 2010, however the move in the currencies has not been solely confined to the Asian markets. Yesterday saw the US Dollar strength, again as a safe haven in the risk off environment, dominate the Euro as well with moves down to lows at 1.0709.
This morning has actually seen some slightly better numbers from the Eurozone with a good performance from the services PMI reading, the number will be seen as a step in the right direction and a welcome relief. ECB officials have been talking recently about the 2% inflation target, with Praet saying that there is no plan B to push the rate closer to the bench mark. Numbers earlier in the week showed that inflation continues to dip despite the raft of measures slowly being brought in by the ECB. We must continue to see strong gains in other areas of the economy if inflation is set to remain low, and today’s strong PMI reading is a sign that things the measures are making some gains, just not in the key places.
The week will now start to gear up to the US jobs report due for release on Friday, and with rate hikes still the topic of conversation for many the number will be as important as ever. Today sees the build-up begin with the US ADP payroll number released later this afternoon as well as trade balance and mortgage application numbers. Then later after the opening bell in the US we get more PMI and ISM numbers. So it’s a busy day for major markets as traders look for the next big move, this afternoons figures could well give things a bit of a kick but the smart money will be waiting for Friday’s jobs report and any clues as to when we may see the next rate hike in the US.