Investors eye up the UK’s manufacturing PMI for August
The new month kicks off with a bang, bringing with it another busy day of global economic releases. It all began with a string of manufacturing purchasing managers’ index (PMI) reports for August from all across the Eurozone. While the final reading of the Eurozone manufacturing PMI overall recorded a dip, that of Germany held steady. Last month’s factory activity data from Spain and Italy in particular came in disappointing.
Meanwhile, the UK’s manufacturing PMI advanced more than anticipated and entered into expansionary territory in August. Later in the day, two US releases - namely weekly jobless claims and the ISM manufacturing index - will be widely followed ahead of tomorrow’s official nonfarm payrolls report.
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 the UK’s Markit manufacturing PMI rose above expectations to a 10-month high level in August and entered an expansionary phase. Going ahead, market participants look forward to the release of UK’s construction PMI data for August, scheduled to be out tomorrow.
In the previous session, Sterling ended on a stronger footing against its major peers after Britain’s house prices surprisingly advanced during the month. This rise was mainly attributed to weakness in supply of new properties in the market, with the stock of properties for sale in the UK hovering close to 30-year lows. As this report followed closely on the heels of Britain’s upbeat consumer confidence index data, it helped silence advocates of post-Brexit gloom and provided an additional impetus to the Pound. However, a report released by the Bank of England this week showed that British mortgages approved for house purchases fell to an 18-month low level in July.
US Dollar – US Markets
The greenback is trading mixed against the Euro and the Pound this morning. Going ahead, investors look forward to tomorrow’s US nonfarm payrolls report for August to assess the outlook for the interest rate. Last Friday, the Federal Reserve Chairwoman, Janet Yellen, in a speech at Jackson Hole, upped the prospects for a September interest rate rise while remaining optimistic on the US economy.
Yesterday, data showed that US private sector firms created slightly more jobs than expected during the eighth month of the year, indicating that the labour market is continuing on a steady growth path. This data provided a fresh insight into the number of jobs created by US companies just before the official nonfarm payrolls set to release tomorrow. Other economic data indicated that pending home sales rose more than anticipated in July, signaling that demand of homebuyers remained strong despite a shortage of listings on the market. Separately, the Boston Fed President, Eric Rosengren, stated that the US central bank will meet its inflation and employment targets soon.
Euro – European Markets
The shared currency is trading lower against its major peers this morning. Data released a while earlier showed that final reading of the Eurozone’s manufacturing PMI dipped to a 3-month low level in August. Meanwhile in Germany, final manufacturing PMI held steady in August. Separately, manufacturing sector activity in France and Italy recorded a drop during the same month, and Spain’s final manufacturing PMI unexpectedly remained steady.
Yesterday, data showed that a preliminary reading of consumer prices in the Eurozone remained steady on an annual basis in August, but came in below market consensus for a modest increase. However, it still looks a long way away from achieving the European Central Bank’s targeted range of 2.0% inflation. These figures followed disappointing data published just a day prior which indicated that German inflation grew at a slower pace last month. Separately, the Eurozone’s unemployment rate held steady at 10.1%, the lowest since July 2011.
Other Currencies – Highlights
The Australian Dollar is trading on a stronger footing against the greenback this morning. Data released earlier in the session showed that Australia’s retail sales undershot market expectations and flat-lined in July, recording its lowest reading since February this year. Retail sales were dragged down by discounting and weak department store sales during the period. Also, a separate report showed that the nation’s private capital expenditure declined more than expected in the second quarter.
Nevertheless, the Australian dollar found some support after data showed that China’s manufacturing activity swung into expansion territory in August, with the nation’s official manufacturing PMI recording its biggest increase in nearly 2 years. China is Australia’s largest export partner. In contrast, a private gauge of nationwide factory activity stagnated in August. Further, China's non-manufacturing PMI, which tracks business activities in both the service sector and the construction industry, continued to expand in August, but at a slightly slower pace than in the previous month.