Markets Overview

HIGHLIGHTS AHEAD

    In Europe, economic data highlights on Wednesday include the final service sector PMI readings for January, including the first look at the Euro area peripherals and the UK. Focus will certainly be on Greece, where Greek FinMin Varoufakis will be meeting with ECB president Draghi.

    In the US, the ADP employment report will help markets refine their forecasts for Friday’s payrolls survey. The consensus is for a slightly slower 220k gains this month from 241k in December. January final Markit services PMI will be released ahead of the ISM non-manufacturing, where expectations are for a 56.4 print in January. The employment component of the non-manufacturing ISM will also be of interst given that it may shed some light on the labour market. The Cleveland Fed’s Mester will speak on the economic outlook and banking sector at 1745GMT.

    Following the manufacturing PMI release in Singapore last evening, we are expecting more PMI releases today from China (composite and services), Hong Kong, and India (composite and services).

    CENTRAL BANK OUTLOOK

    The Reserve Bank of Australia (RBA) became the latest central bank to ease policy, adding to existing downward pressure on the AUD. The central bank brought the cash rate lower by 25bp to 2.25%. Specifically on the currency, the RBA said the AUD, “has declined noticeably against a rising US dollar over recent months, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.” All eyes will now be on Friday’s Statement on Monetary Policy, and Governor Stevens’ parliamentary testimony the following week.