UK Service PMI - Rumors of Lower Figure prove true, still rebound

This morning on March 5th 2012 at 9:28 GMT (4:28 EST) the PMI figures for UK Services was released. This is the largest sector of the UK economy and as a forward indicator it is an important number to determine GDP for Q1 2012. Recently the Retail Sales numbers have been better and last month this data surprised the market and came out much higher at 56.0 above the 53.3 expected. Expectations were set at 55.0 this month which were perhaps getting ahead of things as we keep being told this recovery will be slow and choppy.

The markets were risk off since the Sunday open. This was mainly due to Chinese Premier Wen saying that growth in China would be less than previously estimated, also an article by the German newspaper the Spiegel saying that Private Sector Involvement (PSI) in the Greek Bond Swap deal would be less that estimated meaning that a CDS might be triggered. This combined with weaker readings for PMI Services from most EuroZone countries other than Germany, kept things risk-off.

About 10-15 minutes before the release there was 'market talk' that the print would be lower than expected and this turned out to be true, however the GBPUSD was already at the lows of the day. This news was very good to trade but recently it has been about the pre-news move, a small spike on the release and then a reversal...Last months quite large deviation was different that this new norm. Today's lower deviation was not as big as last month's positive one, and in the broader context the number is still quite good compared to many other countries. The GBPUSD reversed off its lows.

Here are the figures:

UK PMI Services
Estimates- Median: 55.0 Average: 54.8 Low Estimate: 53.0 High Estimate: 57.0
Actual: 53.8 Prior: 56.00 No Revisions

Here is the 30 second chart of GBPUSD forex pair which shows how despite the weak release the pair reversed higher:

Here is a 5 minute chart of the GBPUSD forex pair which shows the move in price leading into the release. Sometimes many market participants are just waiting for the news to pass before taking trades.

This 1 minute chart of the GBJPY chart shows the pair doing very little, a slight up bias perhaps. The Yen crosses have been reversing major downtrends recently but have given back some of those strong upmoves since the week opened for trading.

On this 1 minute chart of GBPCHF we can see that the British Pound did weaken further. Sometimes using these cross pairs can counteract the general market influences of Risk On/Off=US Dollar Weak/Strong dynamic which affects the majors.

Likewise against the Euro the Pound did eventually weaken some more by moving up in euro strength/pound weakness.

This 1 minute chart of GBPAUD shows how tricky it can be trying to choose the correct cross. Everyone loves the Australian Dollar because it has a great yield-High interest rate, but in a general risk-off environment which is not specifically focused on the EuroZone Debt Crisis, but more because of a China Slowdown or last week's Beranke Comments, the Australian Dollar can actually get hit harder than the Eurusd. Still after a few minutes the GBPAUD did dip some more on Aussie strength/pound weakness.

Just to make the point, here on the 1 minute chart of the GBPCAD we see the Pound would just not weaken against the Canadian Dollar despite the bad news.

Finally a 1 minute chart of the FTSE Future Contract to show how it also moved off its lows after the news.