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Forex: EUR/GBP erases gains after disappointing EMU Services PMI

FXstreet.com (Barcelona) - Coming from flat movements of the Asian session, the EUR/GBP rose above the 0.8500 mark and printed its daily high at 0.8521 ahead of the EMU March Services PMI by Markit. Overall disappointing data triggered a retracement of gains back to the opening price, with a quick stop at 0.8478 low. UK Markit Services PMI was also released and rose from 51.8 to 52.4, beating 51.5 consensus.

The EMU PMI Services fell from 47.9 to 46.4 in March, below 46.5 consensus. The Composite figure eased from 47.9 to 46.5 in March, below 46.5 consensus. The French and German figures were expected to fall from 43.7 to 41.9 and 54.7 to 51.6, but actual March PMI Services data points to a drop to 41.3 to 50.9, respectively. Both Spanish and Italian data were the upside surprise, from 44.7 to 45.3 (consensus of 44.2) and from 43.6 to 45.5 (consensus of 43.5).

Ahead in the day are the BoE and ECB policy meetings. For the BoE: “The risk of further easing does remain alive, but we think that it would require further disappointment in the macro data than what we’ve already seen, and that the BoE is more likely to lean toward targeting measures like expanding FLS rather than more QE”, wrote TD Securities analysts, adding that only a drop to 49 or lower in the UK Services PMI would tip the BoE into delivering more QE today.

“The press conference should be a busy one, with Draghi getting questions on the disappointing Eurozone survey data, whether some ECB members are still pushing for rate cuts, the Cypriot crisis and capital controls, contagion into Slovenian debt and worries of deposit flight elsewhere, and uncertainties over the Italian elections. There is a risk Draghi reinforces some of the disappointment in the data and ability of the ECB to respond if needed, but we don’t see them ready to act yet”, they concluded.

“The Elliott wave count indicated that 0.8417 was the low for this short term move lower and we would allow for a near term rebound towards the 55 day ma at 0.8575”, wrote Commerzbank analyst Karen Jones.

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