Dollar Remains Bid Post-Draghi, Pre-Jobs

The US dollar regained the upper hand as yesterday’s downside correction fizzled out.  Draghi provided just enough details of the asset purchase plans to avoid a rout, but not enough give hope that this is what will turn the eurozone around.  With Europe’s service PMIs released, the market turns its attention to the US employment data.  

The eurozone service PMI was disappointing.  The 52.8 flash reading was revised to 52.4, showing a larger decline from August’s 53.1.  Given the softer manufacturing PMI, the composite slipped to 52.0 from 52.3 flash reading and 52.5 in August.  This still appears consistent with GDP of something on the magnitude of 0.2% in Q3.  

On the country level, Germany was revised to 55.7 from 55.4 flash and August reading.  France went from bad to worse.  Its service PMI fell to 48.4 from 49.4 flash and 50.3 in August.  Italy disappointed as well, with the service PMI falling to 48.8 from 49.8.  Spain pulled back, but at 55.8, down from 58.1, it is still the best absolute reading among the large EMU members.  

There was a rare piece of robust euro area data.  It was August retail sales.  The market expected a 0.1% rise after July’s 0.4% decline.  Instead, a 1.2% jump was reported.  This lifted the year-over-year rate to 1.9% from a downwardly revised 0.5% in July (was initially 0.8%).  That said, it singularly failed to impress the euro bears, who felt little pressure during yesterday’s bounce and remain very much in the driver’s seat.  

Sterling has been sent toward the spike low that was recorded after the first Scottish poll had shown the nationalists were ahead in response to another economic disappointment.  The service PMI fell to 58.7 from 60.5 in August.  The consensus expected a pullback, but not quite so large.  The composite, fell to 57.4 from 59.3.  This is the weakest since June 2013.