Today’s construction PMI data in the UK has shown an unexpected improvement in activity for September, in contrast with yesterday’s weak manufacturing PMI numbers. However, Sterling investors have shown little reaction as they remain on the edge ahead of tomorrow’s crucial services PMI report.
The sharp rally seen in the Japanese Yen from the recent lows highlights wariness among investors ahead of crucial events in Europe and the US this week. After last month’s decisive ECB policy meeting, policymakers are once again in focus today, although no major alteration in the policy is expected. However, traders will be all ears to the ECB President’s post-meeting conference for details about the newly proposed asset purchases plan and prospects of a QE style stimulus.
Pound Sterling – UK Markets
In contrast with yesterday’s disappointing manufacturing activity report, data just released indicated that construction activity in the nation expanded at a faster pace for September. However, the reaction in the Pound remained muted, as investors preferred to remain on the sidelines ahead of tomorrow’s widely watched services PMI report to gauge the overall performance of the UK economy. However, any downside surprise in the data might impact the nation’s third quarter economic performance. Meanwhile, the BoE Deputy Governor, Ben Broadbent, in an interview, indicated that though the domestic economy is on the path of a steady recovery, the nation is still not ready for an increase in interest rates. Going forward today, the Pound is likely to chart movement in accordance to the US economic data and the outcome of the ECB monetary policy meeting.
Data released yesterday indicated that the British manufacturing activity grew at its slowest pace in 17-months for September, weighed down by strong domestic currency as well as weak demand in the UK and Europe.
US Dollar – US Markets
The greenback traded in a tight range against the Euro in yesterday’s trading session. The latest ADP employment report showed that the US economy witnessed robust growth in private sector jobs for September. Additionally, the report revealed that hiring across the manufacturing sector was at a multi-year high, despite the ISM survey indicating a slowdown in the nation’s manufacturing sector for September. This has increased market interest ahead of tomorrow’s non-farm payrolls numbers which is likely to confirm that the labour market has returned to its course of adding more than 200K jobs, especially after last month’s weak jobs data.
The US Dollar is looking for direction against the majors this morning. Today’s US initial jobless claims data is expected to show that the number of people filing for jobless benefits remained below the 300K mark and close to its pre-recession low for the third straight week. Additionally, another report is expected to show a decline in domestic factory orders for August, particularly after strong demand for aircraft and autos resulted in a sharp increase in orders for the previous month.
Euro – European Markets
The Euro traded in a tight range against the Pound and remained close to a one-year low yesterday. Data released showed that the final manufacturing PMIs in Europe’s two largest economies were below the expansion mark. In light of this week’s downbeat Euro zone macro data showing an easing trend in core consumer price inflation along with an unexpected increase in German unemployment, market fears have heightened that the Euro bloc might be slipping into a recession.
Against the backdrop of a weak macro environment in the Euro zone, today’s ECB policy meeting will gain attention. The post-meeting press conference is likely to be the prime focus amid prospects of additional stimulus measures, especially after the first auction of the TLTRO failed to meet the ECB’s target. Markets expect the central bank to provide details about its covered bond and asset backed securities purchase programmes which are expected to be implemented in today’s policy meeting. Additionally, investors will closely track comments from the ECB Chief which might provide hints about what the central bank has in mind to stave off the deflationary threat in the Euro zone.
Other Currencies – Highlights
The Australian Dollar is trading on a firmer footing against the greenback in today’s trading session after data showed that building permits in Australia rose at a robust pace for August. This has strengthened prospects of a higher construction spending which might in turn support the nation’s feeble economic health that has resulted from the weakness in its mining sector. Additionally, another report revealed that trade deficit in Australia narrowed more than anticipated for August, as exports fell at a slower pace compared to imports. However, with both exports and imports declining, market concerns have heightened about weak global conditions weighing on the nation’s trade going forward.
The Australian Dollar will take direction against the majors from the AIG services performance report scheduled to be released overnight. With no other crucial domestic economic releases scheduled this week, traders will eye tomorrow’s official US labour market report for further direction in the Aussie Dollar-US Dollar pair
Pound Sterling Extends Gains, The US Dollar Stays Calm Ahead of FOMC
The Euro Gains Traction on ECB President Draghi's Hawkish Remarks
UK PM May Stands Her Ground in Brexit Talks, Pound Sterling Weakens