• French May PMI services 47.6 vs April’s 46.5. Better than median forecast of 46.8
  • German May PMI services 46.0 vs April’s 43.8. Better than median forecast of 44.5
  • Euro zone May PMI services 44.7 vs April’s 43.8. Slightly better than forecast of 44.5. Manufacturing PMI 40.5 vs April’s 36.8. Better than median forecast of 38.4. Both services and manufacturing PMI 7 month highs
  • BIG NEWS: S&P revises UK outlook to negative from stable; ratings affirmed. Say UK debt burden could approach 100% of GDP and remain near that level in the medium term
  • UK Treasury: S&P say outlook could be revised back to stable. Major uncertainties in world economy. UK Budget set out clear plan to halve deficit within 5 years.
  • PM Brown’s spokesman: UK commitment to sustainable public finances in medium, long-term is “absolute.”
  • UK April retail sales +0.9% m/m, +2.6% y/y. Better than median forecasts of +0.5%, +2.4% respectively
  • UK business investment in Q-1 2009 -5.5% q/q, -6.8% y/y
  • UK April PSNB £8.468 bln vs median forecast of £8.1 bln. Record high for an April
  • UK April PSNCR £5.151 bln vs median forecast of £3.0 bln. Record high for an April

Crazy, crazy morning. Started off OK with EUR/USD and cable bolstered by better than expected euro-zone PMI data. To be honest there was no reaction to better than expected French and German data and there was even a lull after the euro zone data before the market finally kicked into gear.

Cable was just preparing to take on reported sell orders up at 1.5800-35 area and EUR/USD was busy churning through reported sell orders at 1.3820 up through 1.3850 when the proverbial hit the fan.

The wires flashed the news that S&P had revised it’s UK outlook to negative from stable (see above) and cable went from 1.5800 to a session low 1.5519 in what seemed like the blink of an eye. It took longer ofcourse, but not by much.

The Treasury then came out with comments (see above) and this provided sterling with much needed support. We’ve subesequently had comments from PM Brown’s spokesman (see above again), but they have left the market pretty unmoved. Cable has recovered to 1.5640 at writing.

EUR/USD was held hostage to the slump in cable as general risk sentiment took a hit. EUR/USD went from a session high 1.3837 on the S&P news to a session low 1.3742 in no time at all. It’s presently recovered to 1.3785 at writing. Decent buy orders said to lie down at 1.3730.