QE Hopes Take Backseat

Although the BoE’s monetary policy meeting slated next week appears to be a close call, the central bank’s Deputy Governor seems to have changed his stance by joining the camp of naysayers for more monetary stimulus. Furthermore, the CBI sounded optimistic, as it raised its economic growth forecast for the UK. However, downbeat domestic manufacturing PMI just out continues to nurture hopes of more asset purchases next week. Across the Atlantic, a raft of economic releases scheduled later today is expected to provide the initial trends for the fourth quarter and provide first insights into the impact of the Fed’s liquidity boost.

Pound Sterling – UK Markets

The Pound moved higher against its major peers in yesterday’s trading session on watered down hopes of fresh monetary stimulus by the BoE in its next monetary policy meeting. The central bank’s Deputy Governor, Charles Bean, appears to have changed guard, as he cast doubts over the effectiveness of QE as a tool to spur growth. Sterling has continued to move higher against both the greenback and the Euro this morning after the CBI upwardly revised its economic growth forecast for the UK economy. Additionally, data from Nationwide released earlier today revealed that monthly house prices in the UK rose more than expected for October, validating the recent strength shown by the lending figures. Data just out has indicated that manufacturing PMI in the UK declined for October. Meanwhile, NIESR indicated that the austerity programme is hurting growth. In the midst of the brewing crisis in the Eurozone, UK continues to maintain the safe haven tag, as the Swiss National Bank raised its exposure to Sterling in the third quarter.

US Dollar – US Markets

The US Dollar continued to strengthen against the Euro in today’s trading session, as traders stayed cautious ahead of a flurry of key economic releases from the US scheduled over the next two days. Moreover, the Eurozone finance ministers teleconference yesterday failed to find any resolution to the Greek debt problems. In the midst of the prevailing caution among market participants, traders shrugged off improvement in the official manufacturing PMI figures from China. Data released yesterday revealed that Chicago’s manufacturing activity continued to contract for October, watering down some optimism ahead of the ISM manufacturing data due later today. Meanwhile, ADP private payrolls data is expected to set the stage for tomorrow’s crucial non-farm payroll figures. Consumer confidence, jobless claims and construction spending are other releases to watch for in today’s session, ahead of tomorrow’s employment figures.

Euro – European Markets

The Euro turned lower against its major peers yesterday, with the initial recovery against the US Dollar proving short lived, as a deal for Greece’s next aid tranche remains evasive. Following the completion of yesterday’s conference call among the region’s finance ministers, the Euro group Chairman, Jean-Claude Juncker, indicated that a deal could be finalised during the next Eurozone finance ministers meeting, if Greece completes the promised set of actions. Meanwhile, the engulfing crisis in the region continues to take its toll on the region’s labour market, as data revealed that Eurozone unemployment hit another record high last month. Prevalent Eurozone concerns prompted markets to ignore upbeat PMI data from China released earlier today. With no major European economic releases scheduled today and the Euro trading under pressure against the majors, traders are expected to keep a tap on a flurry of macro releases from the US scheduled later today. Moreover, the Euro is also expected to seek direction from tomorrow’s PMI readings from the Eurozone nations and non-farm payrolls data from the US.

Other Currencies – Highlights

The Swiss Franc is trading lower against its peers in today’s session, tracking losses in the Euro. The Swissie is closely linked to fluctuations in the Euro following the SNB’s decision to peg the Swiss Franc to the common currency. On the domestic front, data revealed that the annual retail sales grew at a slower pace for September. However, manufacturing sector showed some signs of improvement, as the Swiss PMI climbed to a reading of 46.1 for October from 43.6 reported in the previous month. Meanwhile, in re-balancing its currency reserves, the SNB increased its exposure to the greenback and Sterling and reduced its holdings of the Euro. With no major domestic economic releases scheduled during this week, the Swiss Franc is expected to seek direction from the US economic releases during the next two trading sessions.