September 06, 2022

Daily Report 06/09/2022

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The final reading for the UK services-sector PMI index was revised down to an 18-month low of 50.9 for August from the flash reading of 52.5 and the composite index also dipped below the 50.0 level. Overall business confidence remained weak with further concerns surrounding the impact of a surge in energy prices. Truss was confirmed as the winner in the Conservative leadership contest, although the margin of victory was narrower than expected which may limit authority. Markets will be watching the Cabinet appointments and, importantly, details of an energy package which are expected to be unveiled later this week. Overall Sterling sentiment was, however, still very fragile given fears over the outlook. Bank of England Monetary Policy Committee member Mann stated that a drift in medium-term inflation expectations was already apparent. She added that it was better to act forcefully and fast to keep expectations in check rather than adopting a gradual approach and maintained a hawkish policy stance.

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The final August reading for the Euro-Zone services-sector PMI index was revised down to 49.8 from the flash reading of 50.2 which pushed the sector into contraction territory and the composite index was also below the 50.0 level. Spanish data was weaker than expected, although the Italian reading beat market expectations and edged back into expansion territory. Cost pressures eased slightly but remained intense in historic terms. The Euro-Zone Sentix business confidence index declined further to -31.8 for September from -25.2 previously which was weaker than the expected reading of -27.5 and the weakest reading since May 2020. According to Sentix, the economic situation in the Eurozone clearly deteriorated again. It added that signs in Europe have been pointing to a considerable recession for some time and it added that there are now increasing signs of a corresponding development at the global level. Euro gas prices retreated from intra-day highs which provided marginal relief and there was some reluctance to sell the Euro ahead of Thursday’s ECB policy meeting.

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Tight ranges prevailed in trading with limited activity on the Monday following a US jobs report amplified by the US Labor Day holiday. Treasury markets were closed for the Labor Day holiday on Monday, but futures edged lower in electronic trading and higher yields underpinned the dollar. US equity futures also held small gains and the dollar was able to edge higher towards the European close.

Key Data 

15.00 ISM Services PMI (Aug) Exp. 55.5 Prev. 56.7