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Service-sector ISM surprised to the upside in January, coming in at 42.9 versus expectations for 39.0. Coming on the heels of a few signs of life in the US housing market, dealers are taking some comfort in the hope that perhaps the rate of economic decline is slowing after an abrupt drop in the fall of 2008. Employment figures will continue to drop for months after the economy bottoms, so don’t look for much help from non-farm payrolls on Friday.
EUR/USD has rebounded back above 1.2900, helped by the data and by the very rational fear of being short near 1.28, a strategy that has backfired badly in recent sessions. Cable is 1.4520, after triggering stops above 1.4500. 1.4545/50 is key resistance near-term. EUR/JPY has risen toward resistance in the 115.60/80 area.
