GBP and EUR ignore positive data; PBoC raises rates; ISM services is next

USD started to gain yesterday on the news of Portuguese multinotch downgrade by Moodys. This trend has continued throughout Asia and London and continues into New York morning. PboC increases interest rates, GBP and EUR ignore positive data. Focus turns to ISM services PMI.

Chinese central bank hiked interest rates 25 basis points to 6.56% today, ahead of next weeks CPI data. This is already a third hike this year confirming official concerns over increasing inflation. Even though todays rate increase does not come as a surprise, the reaction is fairly typical as the AUD is hit the hardest.

As a consequence of Moodys downgrade, periphery bonds spreads continue to widen which is adding pressure on the already falling Euro. Portuguese-German spread on the 10 year bond reached its highest level since Euro was introduced, over 1046 bps.

UK mortgage lender Halifax reported that House Price Index rose 1.2% in June, significantly higher than Mays 0.4% and German Manufacturing Orders for May reached 1.8% while analysts expected -0.5%. Neither of these releases was able to improve the risk off sentiment.

New York session kicks off at 8:30 am ET with Canadian Building Permits for May. Analysts expect a significant increase to 5.1% from the previous, shockingly bad print of -21.1%. ISM Non-Manufacturing PMI for June is due at 10:00 am ET and market expects a slight decrease to 53.9 from previous 54.6.