The dollar tended to consolidate on Thursday following sharp losses the previous day, a notable feature was again the difficulty in securing any significant gains, especially against the Euro.
The Euro-zone PMI indices were mixed as the service-sector as a whole registered a marginal increase to 52.2 in the final reading from a flash 52.1. The Italian index moved above the 50 level for the first time since June 2011, but there was a fresh Spanish contraction which caused some concern. The Euro-zone retail sales data was stronger than expected and there were comfortable bond auctions in Spain and Italy. There was no significant net Euro impact with the ECB signalling it was on hold yesterday.
There was no significant deterioration in risk conditions despite on-going concerns surrounding the US government shutdown and growing fears that there would be a destabilising stand-off surrounding the debt ceiling. Markets will be increasingly uneasy if the shutdown extends beyond the end of next week.
The US jobless claims data was again better than expected at 308,000 from 307,000 the previous week, the fifth successive tome the data has been better than expected. The dollar struggled to gain any traction with traders struggling to combat the anxiety triggered by no payroll report on Friday.
The latest ISM non-manufacturing data was also significantly weaker than expected with a decline to 54.4 from 58.6 previously. The orders component remained strong while the employment index edged lower. Looking at the past two months together, steady growth is the key feature, but the dollar did slide weaker following the data with dealers needing little excuse to push the US currency weaker and test support levels.
EUR/USD again attacked the 1.3625 Asian peak following the US data, but was repulsed at this resistance region with evidence of increased sovereign supply. USD/JPY was unable to gain any traction and dipped to lows around 97.30 in US trading.
Although the UK PMI services-sector data was again marginally weaker than expected with a dip to 60.3 for September from 60.5 previously, this was still a robust report in the context of the past two years. There was an estimate from Markit that the third-quarter GDP expansion could have been as much as 1.2% which will reinforce optimism surrounding the forthcoming data with growth potentially the strongest for 6 years.
Sterling did recover ground following the data as GBP/USD regained the 1.62 level, but there was fresh selling pressure early in the New York session with resistance on any approach to 1.6250 and lows around 1.6165 as EUR/GBP attacked resistance above 0.8400.