Yen extends this week's rally while commodity currencies are under pressure in Asian session today. While China stocks stabilized and recover mildly, major Asian indices are generally lower. At the time of writing, Japan Nikkei is trading down over -1%, Hong Kong HSI is down -0.5%, Singapore STI is down -0.5% while Australia ASX200 is down -1.2%. The China Caixin/Markit PMI services dropped to 50.2 in December, hitting a 17-month lower and missed expectation of 52.3. The data showed services sectors in China is barely expanding and momentum has been deteriorating quickly. Meanwhile, released earlier this week, the Caixin PMI manufacturing dropped to 48.2 and stayed below 50 for the 10 straight month. Worries over China's slowdown will likely continue to pressure Asian markets.
Services data will be the focus in European session today. UK PMI services is expected to drop to 55.6 in December. PMI data released so far this week from UK are mixed with PMI manufacturing dropped to 51.9. But PMI construction rose to 57.8. Sterling has been under some pressure on talks that BoE would hold their hands off from rate hike this year. But movements in the pound would more likely be driven by developments elsewhere. Eurozone will also released December PMI services revision and PPI.
Highlights of the day will be events in US. ADP employment report is expected to show that private sector jobs grew 198k in December. ISM services is expected to rise to 56.0 in December. Performance of the job market will be critical for FOMC members to determine the path of tightening this year. The employment component of ISM manufacturing was already a disappointment and dropped to contraction region at 48.1 in December. The employment component of ISM services will also be watched today. US and Canada will also release trade balance.
More importantly, Fed will release minutes of the December 15-16 FOMC meeting, when there was finally a rate hike. Investors will scrutinize the minutes for policy makers' thinking about the rate path and the debates among them.