Britain’s Manufacturing Activity Gains Pace
Data just released has shown that Britain’s manufacturing PMI improved more than expected for January, raising anticipations for a rebound in the nation’s economic growth for the first quarter. Moving ahead, with UK construction and services PMI reports due this week, investors will scrutinise these prints to gain a better insight into the country’s overall macro health last month.
Across the Atlantic, after Friday’s preliminary GDP data indicated that the economy expanded at a slower than expected pace for the last quarter of 2014, traders will eye today’s ISM manufacturing survey to gauge the health of domestic activity for the first month of 2015. In the Euro zone, the final manufacturing PMI print for January was in line with the flash estimates.
Pound Sterling – UK Markets
The just out Markit report has shown that the pace of activity in Britain’s manufacturing sector improved for January, strengthening the possibility of an improvement in domestic consumption levels. Sterling gained ground against the greenback after the release of today’s data. Going forward, traders will eye tomorrow’s construction PMI and Wednesday’s services PMI data in the UK to gauge the overall health of the economy for January.
On Friday, the Pound reversed its losses against the greenback in the latter half of the trading session following the release of the weak US GDP report for the last quarter of 2014. A report released on Friday revealed that the demand for credit among UK consumers eased for December. This slowdown was mainly led by a fall in unsecured loans which was partly offset by an increase in credit card spending and mortgages approvals for house purchases. With mortgage approvals rising for the first time in six months, expectations among investors strengthened that the cooling off in the UK housing market might be nearing its end.
US Dollar – US Markets
The US Dollar remained almost unchanged against most of its major peers on Friday following the release of the soft preliminary GDP report in the US. The report revealed that economic growth in the nation moderated more than anticipated for the last quarter of 2014 as weak business investments and a wider trade deficit outweighed the positive impact of robust consumer spending. For the quarter, expenditure among local consumers increased at its strongest pace since 2006, amid a solid recovery in the US labour market. However, the final Reuters/Michigan consumer confidence reading was revised slightly down for January but stayed at its highest level since January 2004.
The greenback is trading in a tight range this morning ahead of the ISM manufacturing PMI survey in the US. The survey is expected to show a slight slowdown in the nation’s manufacturing sector for January and possibly strengthen concerns that an elevated value of the US Dollar and dull macro conditions abroad are weighing on the pace of domestic activity. Going forward, traders will keep a tab on US employment data later this week for further direction.
Euro – European Markets
In Friday’s trading session, the common currency lost ground against the greenback and fell below the 1.13 mark following the release of the dull preliminary consumer price inflation readings in the Euro zone. The report showed a more than anticipated ease in domestic consumer prices and an unexpected fall in the bloc’s core inflation measure for January. Although low oil prices are offsetting the impact of a weaker Euro, concerns of deflation strengthened in the Euro bloc after cheaper oil broadened its grasp over prices of other products. However, with other macro triggers indicating that sentiment among domestic investors, firms and consumers is improving, market participants will keep a tab on Euro zone’s economic data going forward, ahead of the ECB’s quantitative easing programme beginning next month.
The Euro is trading on a firmer footing against the Pound this morning. Today’s revised manufacturing PMI report released in Euro zone showed no major deviation from its flash estimates for January and thus confirmed that the pace of activity in the region’s manufacturing sector improved last month.
Other Currencies – Highlights
On Friday, the Canadian Dollar lost ground against the greenback following the release of the disappointing GDP print in Canada. The print revealed that Canada’s economy contracted unexpectedly for November from the prior month. With the Canadian economy contracting at its strongest pace in almost a year, anticipations among market participants have strengthened that the Bank of Canada might further cut interest rates at its upcoming policy meeting in March. Meanwhile, losses in the Canadian Dollar were capped later in the session, especially considering a sharp increase in global crude oil prices and its close correlation with the Canadian Dollar. In a noteworthy development, the IMF opined that Canada’s housing market is overvalued by as much as 20% which further created additional pressure on the Canadian Dollar against the majors.
Going forward, traders in the US Dollar-Canadian Dollar pair will keep a tab on today’s manufacturing PMI reports in the US and Canada for further direction.