Leading up to this afternoon’s US jobs report the British pound has slipped versus the dollar and the euro with the EUR/GBP recovering to levels prior to the renewal of the European debt crisis two weeks ago.
A weaker than forecasted UK Services PMI number slumped to 53.8 from 54.2 on consensus forecasts of 54.4. This had sterling on its back foot with the cable briefly falling below 1.6300 before trading back above the support. The 1.6300 level has significance for two reasons; it is a previous resistance/support level from the high of May 20th and the 20-day moving average is housed there. The move lower in the GBP/USD may have scope back to the rising trend line from the May 2010 lows which comes in today at 1.6140. Sterling was also weaker in the crosses as the EUR/GBP rallied above levels prior to the renewal of the European debt crisis two weeks ago. The EUR/GBP could climb to test the April high at 0.9040.
The EUR/USD is trading back and forth before the jobs report. Initially the EUR/USD rose after the euro zone final services PMI came in above expectations but the pair soon gave back those gains and now trades just below the 1.4500 level before the report. As previously discussed a better than expected jobs report may allow the USD to regroup after suffering sharp losses this week to the euro. The EUR/USD could climb to 1.4570 at the 61% retracement from the May declines, but a likely scenario may be the EUR/USD gives back some of the weekly gains before the weekend close.
As always the risk runs for off the cuff comments from European or Greek officials as a new bailout package for Greece looks to be forming between the parties. No restructuring of Greek debt will take place at this time but the possibility exists for a debt reduction in the future.
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