Releases from Europe:

May                                Forecast   Actual
Italian Services PMI            49.5       48.1
French Services PMI            50.7       50.5
German Services PMI          53.7       53.8
Euro-zone Services PMI       50.6       50.6
Euro-zone Composite PMI    51.1       51.1

No real surprises from the European final Services PMI releases except for the Italian number which fell out of bed down to 48.1. Services have been the area that has suffered across Europe as households slash their monthly budgets.

Later today sees the Euro-zone retail sales which, if they follow the German lead could be quite soft…

The following economic releases are due today:

April
Euro-zone Retail Sales          (MoM)     +0.2%
Euro-zone Retail Sales           (YoY)     - 0.8%

May
U.K. Services PMI                                  50.5
U.K. BRC Shop Price Index
U.S. Challenger Job Cuts        (YoY) 
U.S. ADP Employment Change            - 30.0K
U.S. Non-Manufacturing ISM Composite    51.0

June
Euro-zone OECD Economic Outlook

The central theme for comments today is Bernanke’s comments on the Dollar which on the whole have been interpreted as beneficial for the Dollar. It is interesting to note that matters concerning the Dollar are generally handled by the Treasury which has always stated that a strong Dollar is in the interests of the country.

However, Bernanke having before observed that a lower Dollar is beneficial for U.S. exporters this time also observed that a lower Dollar has negative impact on inflation. This potentially suggests that the Fed is adjusting its position from supporting a weakening economy to one that is beginning to concentrate its attention on inflation and the prospect of interest rate hikes.

It’s probably not a simple function though these days. A higher Dollar has helped oil prices to edge lower to 4pb (but let’s not get too excited – it was at 0bp 2 months ago) so the move lower is very shallow at this stage. Certainly it is not enough to reverse any of the shocks seen so far.

Hiking interest rates may help the Dollar recover but it probably won’t make consumers particularly willing to spend their tax rebate checks and this is where the fragility of the recovery is based.

Higher interest rates will squeeze corporate profits as well and with continuing claims in a steady uptrend the last thing the Fed will want to do is hasten the pace of the growth in the unemployed…

So for now with the ECB and BOE rate decisions tomorrow and the “preliminary” unemployment data through the Challenger and ADP data tonight the market is probably playing a waiting game with the hope that either ECB or Fed makes their decision whether to buy or sell an easier one.

Probably neither will provide the market with that comfort…

Note important support and resistance areas:

          USDJPY        EURUSD       USDCHF        GBPUSD
Res:  105.86-25    1.5627-61    1.0585-23    1.9650-75
Res:  105.28-54    1.5515-40    1.0446-89    1.9595-05

Spt:   104.50-80    1.5361-85    1.0356-86    1.9498-23
Spt:   103.46-86    1.5255-83    1.0296-20    1.9390-20

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