A Light Global Economic Calendar Day
Today is a slow day for economic news, in part because of the Labour Day holiday in the US. The key event for the week in the UK will be the Bank of England’s monetary policy meeting scheduled for Thursday. Markets anticipate that there will be no change in the vote count from the August meeting, as the recent turmoil in the financial markets and fears over global growth in late August are likely to have prevented any of the dovish MPC members changing their position just yet.
Amid a data thin day globally, investor focus was on the German economy where data showed that industrial output rebounded in July, albeit at a slower than expected pace.
Pound Sterling – UK Markets
The Pound is trading on a firmer footing against its major currency counterparts this morning, amid the absence of any key economic data inputs at the start of the week in the UK to influence trading in the home currency against the majors. However, in the coming days, there will be plenty of UK macroeconomic indicators that will draw significant market attention. Additionally, the Bank of England meeting will be in spotlight on Thursday, with markets anticipating that the monetary policy committee will keep its benchmark interest rate unchanged at 0.5%. Investors will be particularly interested in any discussions relating to any impact of the recent market volatility on the UK’s inflation and growth outlook. Also, any change to the 8-1 vote from the August meeting within the MPC vote will be eyed with interest.
On Friday, Sterling dropped to multi month lows against the US Dollar as currency traders digested the latest US labour report, which showed a decline in the unemployment rate in the US.
US Dollar – US Markets
The Euro – US Dollar currency pair edged well above the 1.10 mark on Friday after the mixed employment data from the US Department of Labour offered few cues as to whether the Federal Reserve will raise its record low interest rates later this month. The US economy added less than expected jobs for August, while the unemployment rate ticked down to 5.1%, its lowest level since April 2008. Though hiring slowed a little in August, the nonfarm payrolls numbers for June and July were revised upwards, suggesting steady growth in the US labour force. Also, average hourly wages rose more than market expectations for August. Separately, there have been other factors in recent times such as slowing growth in China which could act as a drag on global growth, that have clouded projections about the Fed tightening its monetary policy at the September meeting.
Moving ahead, reports on import prices and producer price index scheduled later this week in the US will likely provide further insight as to how continuing economic turmoil overseas and a renewed slide in oil prices have affected the inflation environment.
Euro – European Markets
The Euro traded on a weaker footing against the greenback on Friday, as investors continued to digest the latest ECB forecast for economic growth and dovish commentary from the ECB Chief that the bank could expand its stimulus programme if necessary and extend it beyond September 2016. However, by the end of the trading session, the shared currency had recovered some of its losses against the US Dollar after key nonfarm payrolls data showed that job growth in the US was substantially weaker than estimated for August.
The common currency has nudged lower against the major currencies this morning. Data released earlier in the day showed that German industrial production data, adjusted for seasonal swings and inflation rebounded in July, signalling that German manufacturers have benefitted from rising domestic demand and continued expansion in the Euro area despite growing fears of slowing global growth. Meanwhile, just released Sentix survey data showed that sentiment in the Euro zone weakened more than estimated for September as concerns of a slowdown in China weighed on growth expectations.
Other Currencies – Highlights
The Australian Dollar has started off the week trading on a stronger footing against the US Dollar, after overnight data showed that Australia’s construction sector last month expanded at the fastest pace in nearly a year. The AiG Construction Index indicated that three out of the four of its sub-indices including new orders, construction activity and employment rose in August after contracting in July, but supplier deliveries remained in contractionary territory for the fifth straight month. The upbeat construction data has come out less than a week after data had showed that the Australian economy grew less than expected in the second quarter of this year. Gains in the Aussie Dollar were also supported by data released earlier today which showed that job advertisements on the internet and in newspapers rose in August, recovering from a sharp fall in July.
Trading volumes are expected to remain low today partly because of a Labour Day holiday in the US. Going forward, investors will look forward to the release of Australia's NAB business condition and confidence indices data, scheduled tomorrow.