Pound to Euro remains firm as UK Services data caps off a strong week; ultimate direction still hinges on Greece though

Last Updated on Friday, 03 February 2012 10:26 Written by Will Peters Friday, 03 February 2012 10:22

The pound to euro is holding recent advances this morning; the big market event of the day will be the US Non-Farm Payrolls release.

On the domestic front the pound will have firmed on news that Britain's dominant services sector expanded at the fastest pace in 10 months in January and firms grew much more optimistic, a survey showed on Friday, crowning a raft of data this week that raised hopes the economy may avoid recession.

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The figures will be food for thought for the Bank of England as it considers whether to extend its quantitative easing programme of gilt purchases next week, after the completion of the 75 billion pounds it started in October.

The good data will cast doubt on further moves which are ultimately GBP negative.

That said, ultimately, the direction of this pair still hinges on Greece, whilst investors will eye this morning’s Services data from the UK.

The euro is likely to decline further today as Greece and its creditors struggle to reach an agreement on a debt swap.

Luxembourg PM Jean-Claude Juncker conceded that steps to tackle the debt crisis at the summit on Monday were largely insufficient and that Greek bond swap talks with private creditors are “ultra difficult”.

It was hoped that a conclusion would be reached by the end of this week, which is now looking increasingly unlikely.

Other than headline trading coming from news from the euro-zone, direction today will be affected by Services PMI results in the UK, and jobs data from the US at 13:30 this afternoon.

The pound continues to hold steady against its US counterpart, as investors eye jobs data later this afternoon.

Non-Farm employment data from the states – a key gauge in determining the health of the US economy is released at 13:30 this afternoon, with expectations that jobs continue to be provided, but at a slower rate. An upside surprise would bolster risk-sentiment, and could benefit this pairing in the short term.

If the jobs data is poor, it could see a flee to safety for investors in the short term, although it would add to the case for more stimulus from the Fed. The likelihood will be that concerns over monetary easing in both the UK and US will keep this pair fairly range-bound today.