Daily Market Report 26/05/16


Weak service sector growth persisted in the US as Markit Services PMI figures were released, which came out at 51.2, below the consensus of 53.1 which was predicted.  The release also stated that business optimism eased to its lowest levels for over six and a half years.  US service providers indicated a sustained upturn in overall business activity during May, but the rate of expansion was only marginal and the weakest for three months.
Other poor data included the quarterly house price purchase index, which worsened from 1.5% to 1.3%. US crude oil inventories also plummeted, as stocks fell by 4.2m barrels last week, a much large fall than the 2.5m barrels expected.  In turn, WTI reached its highest price since October 2015 at $49.34.


No key data was released; however Sterling extended its strong bid tone with GBP-USD climbing  to a fresh 3-week high level. The pair gained further traction after the latest IG EU Referendum poll suggesting 44% votes for ‘Remain ‘ camp, compared with 38% for those favouring to leave. The Institute of Fiscal Studies (IFS) cautioned that the UK could face two more years of tough austerity measures if the country voted to leave the EU, a prospect that investors assessed would push more voters towards the ‘Remain’ camp, again supporting the increased optimism in Sterling.


There was a successful conclusion to the Eurogroup’s latest meeting to discuss the Greek bailout program.  After over 11 hours of summit talks, Eurozone leaders announced a new deal to rescue Greece with its third bailout package. The outline of the deal allows the Eurozone to extend €10.3bn in rescue loans to keep Greece afloat this summer, beginning with a €7.5bn cash release next month.  This positive news wasn’t mirrored in the markets however as analysts believed the bailout is just an attempt to cover up the cracks and doesn’t solve the deep underlying issues the Eurozone could face should Greece default in the future. 

Key Announcements

GBP: 08.30 – Gross Domestic Product (QoQ) expected to remain at 0.4% 
GBP: 09.30 – Gross Domestic Product (YoY) expected to remain at 2.1%
USD: 12.30 – Core Durable Goods Orders (MoM) expected to rise from -0.2% to 0.3%
USD: 12.30 – Unemployment Claims expected to fall from 278,000 to 275,000