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Weak manufacturing data weighs on Dollar

The wider services sector will come under the spotlight today as the US will release a slew of employment data.

Weak manufacturing data weighs on Dollar

The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI), a leading indicator of confidence in the US manufacturing sector released yesterday, 3 January, suffered its sharpest slide from 59.3 in November to 54.1 in December.

Despite showing expansion in the sector (a reading above 50 indicates growth), the drop in confidence levels shows trade tensions and fears of a slowdown are starting to take hold.

China and the US will hold trade talks on 7 and 8 January in Beijing as the world’s largest economies try to end continued tensions, which have been rattling markets and investors over the past year.

Key releases to watch today

The Eurozone’s PMI data released at 09:00 (GMT) followed by the UK release at 09:30, which will focus on the services sector.

The Eurozone manufacturing PMI showed a sharp slowdown in confidence this week and the services sector is anticipated to follow suit, forecasting a drop from the previous month’s 53.4 to 51.4 in December.

We should expect some volatility in the Pound if data for the UK services sector, which makes up 76 per cent of UK GDP, miss expectations and come in below the forecast of 50.7. The previous read of 50.4 showed a slip in confidence towards the contraction.

Across the pond, the US will release its non-farm payrolls data at 13:30, which will provide insight into the strength of the labour market. Analysts have forecast an addition of 177,000 to the labour force in December. A miss here could suggest further cracks may be showing in the US economy.

This afternoon Federal Reserve Chair Jerome Powell is scheduled to give his first speech of 2019 at 15:15. Investors will listen to clues on the recent data and any indication of a stock market correction could affect the planned path of interest rates, with two rises forecast for later this year.

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