A Busy Day for Non-US Economic Releases
The US markets are closed today on account of the Labour Day holiday. But by no means does the day look dull as there is a string of economic releases from other parts of the globe. In the UK, services PMI rebounded above expectations in August. The final reading of services purchasing managers’ index (PMI) in the Eurozone and Germany recorded a decline for August, and market participants now await the release of the Eurozone’s retail sales data for July. The highlight this week is the European Central Bank’s (ECB) monetary policy meeting.
The G20 summit concludes today. British Prime Minister (PM), Theresa May, had a difficult start to the summit as US President, Barack Obama, stated that the UK would not be the priority for a US trade deal and Japan threatened it would pull its investments from UK unless a trade deal with the European Union is secured.
Pound Sterling – UK Markets
The Pound has extended its previous session gains against the US Dollar and the shared currency this morning, after the just out data showed that Britain’s Markit services PMI bounced back into growth territory in August, after posting two straight contractionary readings. This latest data joins the growing list of robust British indicators, after both UK’s manufacturing and construction PMI’s outperformed market expectations for August. Later today, the nation’s BRC retail sales monitor for August is up for release.
On Friday, Sterling hit a 1-month high against the greenback after the UK’s construction PMI improved above expectations in August. Also, the US Dollar weakened after nonfarm payrolls slowed more than anticipated in August. Separately, the British PM, Theresa May, warned that the UK will have to weather some rough seas as it gears up to formally exit the European Union. The PM, who is currently on her first G20 appearance in China, is on a mission to reassure the country’s diplomatic friends that the UK is an ally worth having.
US Dollar – US Markets
The US Dollar is trading lower against the common currency and the Pound this morning, after Friday’s disappointing US jobs report reduced chances of an interest rate increase by the Federal Reserve (Fed) this month. Data showed that nonfarm payrolls fell short of market forecast in August after two straight months of robust gains. Hawkish comments from various Fed policymakers in recent weeks had raised expectations that tightening of monetary policy would begin soon. Other economic data indicated that the unemployment rate in the US unexpectedly remained unchanged at 4.9% in August. Meanwhile, average hourly wage earnings, a key indicator to measure inflationary pressure, advanced less than anticipated in August.
In other economic news, US factory orders recorded its biggest gain in nine months in July, driven by a big jump in demand for commercial aircraft. Meanwhile, the final estimate of the nation’s durable goods orders came in line with consensus estimates in July.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. Data released earlier in the session showed that the final reading of the Eurozone and German services PMI declined in August, but French and Italian service sector activity rose more than anticipated during the same month. Further, Spain's services PMI surpassed expectations in August, boosted by the hotel and restaurant industry, as the nation witnessed record tourist arrivals during the month. Separately, the Eurozone’s Sentix investor confidence registered a more than expected increase for September. Going ahead, the region’s retail sales data for July is scheduled to release shortly and is expected to rise. This week’s most important development will be the ECB’s monetary policy meeting.
On Friday, data showed that the Eurozone’s producer price index rose in line with market expectations in July. However, this was the weakest monthly reading since April 2016 as energy prices exerted huge downward pressure on the index.
Other Currencies – Highlights
The Japanese Yen is trading on a strong footing against the greenback this morning. Data released earlier in the session showed that Japan’s labour cash earnings logged a second consecutive gain in July. However, the nation’s services sector activity deteriorated in August, after slightly expanding in the previous month. Separately, the Bank of Japan (BoJ) Governor, Haruhiko Kuroda, defiantly dismissed his critics and vowed to continue easing monetary policy by using existing or new tools until the central bank achieves its 2.0% inflation target. Looking ahead, this week appears to be a busy one in Japan, with a plethora of data points lined up for release. This includes the nation’s second quarter GDP, trade balance, tertiary industry index, economic and coincident indices and the Eco Watchers survey data.
On Friday, the Japanese Yen ended lower against the US Dollar despite the release of disappointing US nonfarm payroll figures. On the domestic data front, Japan’s consumer confidence index came in better than expected for August.