With last week’s broadly mixed PMI reports in the UK, market attention has now shifted to tomorrow’s NIESR GDP estimate for an initial insight into the growth prospects of the nation during the third quarter. Additionally, this week’s industrial and manufacturing output data along with the BoE monetary policy meeting will keep Sterling investors on their toes.
In the Euro zone, today’s disappointing Euro zone Sentix consumer confidence and German factory orders reports have added to signs that the region’s economic woes are far from over. Across the Atlantic, Friday’s stronger than expected US non-farm payrolls report has cemented hopes for an earlier than expected increase in interest rates once the US Fed ends its monthly bond buying programme later this month.
Pound Sterling – UK Markets
The recent run of soft UK economic data continued to dampen the Pound, with the Pound-US Dollar pair nudging below the 1.60 mark on Friday following a slower pace of expansion in the UK services sector for September. Furthermore, the release of upbeat US economic data heightened speculation for a sooner than expected increase in interest rates in the US, supporting the US Dollar against the majors.
With no major economic releases in the UK and the US today, the Pound is trading in a tight range against the US Dollar this morning. Going forward, investors will keenly eye tomorrow’s NIESR GDP estimate in order to get further insight into the pace of recovery in the UK during the third quarter, especially in the wake of broadly mixed macro data in the nation lately. Additionally, tomorrow’s industrial and manufacturing production data will be watched closely to ascertain the pace of revival in the nation’s manufacturing sector. Furthermore, this week’s BoE policy meeting will be on tab to gauge any consensus among policymakers, primarily considering a split view among members over the timing of an increase in interest rates.
US Dollar – US Markets
Upbeat US data saw the US Dollar moving higher against the majors on Friday, The domestic labour market report showed an unexpected drop in the nation’s unemployment rate for September, for the first time since July 2008. Additionally, data revealed that employers added more than anticipated jobs, particularly due to strong hiring pace in the US manufacturing sector. Separately, the ISM reported that the pace of non-manufacturing activity in the US slowed less than expected for September, pacifying investors especially after last week’s soft manufacturing PMI numbers. With the US Fed expected to end its bond purchases programme this month, speculation of the US Fed raising interest rates are picking up steam as robust employment growth could give more ammunition to the policy hawks.
With no major macroeconomic data scheduled today, the greenback is likely to remain supported against the Euro after Germany reported a more than anticipated drop in factory orders. Going forward, markets will keep a tab on the minutes of the latest Fed’s policy meeting scheduled later this week for further direction to the US Dollar.
Euro – European Markets
Data out earlier today showed that German factory orders declined more than expected for August, after orders in the previous month rebounded on the back of improved demand from outside the Euro bloc. In light of last week’s soft German manufacturing activity report, today’s data has raised concerns about the impact of geopolitical tensions in Eastern Europe on the performance of the nation. Also, with the Euro remaining weak lately and external demand conditions remaining fragile, market concerns continue to build up that Europe’s largest economy might be heading towards a recession. Additionally, another report revealed that confidence among investors remained subdued in Euro zone, as signs of deteriorating morale among consumers continued to strengthen prospects of a deflation in the region. However, the Euro showed little reaction to today’s macro data and remained range bound against its major peers.
On Friday, the Euro dropped against the greenback and moved close to the 1.25 mark following the release of soft services PMI readings across most of the European nations and upbeat US labour market report.
Other Currencies – Highlights
The Aussie Dollar lost ground against the US Dollar in Friday’s trading session and dropped below the 0.87 mark following the release of upbeat US labour market data for September. Additionally, over the weekend, a private survey showed that annual consumer price inflation in Australia eased for September to its lowest level since October 2013. In light of deteriorating morale among consumers and inflation approaching close to the central bank’s lower band of the target range, markets will keep a tab on tomorrow’s policy meeting of the Reserve Bank of Australia for further direction to risk appetite.
Furthermore, this week’s labour market report in Australia is anticipated to show a rise in the unemployment rate for September, despite investors expecting a drop in labour participation. Additionally, with the minutes of the US Fed’s latest policy meeting and Chinese services PMI reading scheduled later this week, the Aussie Dollar is expected to witness some volatility against the majors.
British Pound Gathers Strength on Strong Retail Sales Data
Euro Weakens as German Economy Contracts in Q2
Dollar Rises after the US Delays Tariffs on Some Chinese Imports