Macro Data Sends Pound Lower
Data released this morning revealed that manufacturing PMI in the UK surprisingly dropped for December and raised concerns about the strength of the British domestic recovery. Meanwhile, another report showed that November’s mortgage approvals in the UK continued to ease for a fifth straight month, though approvals fell less than anticipated. The Pound has reacted sharply to the disappointing PMI data. Market participants now await next week’s crucial services PMI data and the BoE’s policy meeting. Meanwhile, the Euro continued to trade under pressure against its key peers after the ECB Chief reiterated that the central bank stands ready to implement an outright bond purchase programme in the Euro zone, if required.
Across the Atlantic, investors will keep a tab on the ISM manufacturing PMI numbers later today to gain an insight into the nation’s manufacturing performance for the final quarter of 2014.
Pound Sterling – UK Markets
Data just out indicated that the pace of manufacturing activity in the UK unexpectedly slowed for December, raising concerns about the strength of domestic demand. However, considering that the British economy is dominated by the services sector, market participants will keenly eye next week’s services PMI data to better gauge the nation’s overall current economic health. Separately, another report indicated that net consumer credit in the UK came in higher than market expectations for November, while mortgage approvals for home purchases dropped less than expected. The Pound dropped sharply against the greenback following the PMI reading and is now oscillating around the 1.55 mark. Later today, investors in the Pound-US Dollar pair will keep a tab on the ISM manufacturing PMI report in the US for further direction.
Going forward, market participants will eye the BoE’s policy meeting and the credit conditions survey next week to reassess their view towards the timing of an interest rate rise in the UK.
US Dollar – US Markets
In yesterday’s thin trading session, the greenback traded in a tight range against the majors following the release of Wednesday’s mixed economic updates. The weekly jobless claims survey released on Wednesday showed that the number of first time jobless beneficiaries rose more than expected for the previous week. Considering that the Conference Board’s recent report had revealed that consumers in the US expressed concerns about the nation’s labour market growth going forward, the downbeat jobless claims survey has stoked some concern among investors. Traders will eye next week’s crucial labour market report in the US to better gauge the nation’s job market health for December. Separately, another report released on Wednesday revealed that November’s pending homes sales in the US climbed at its strongest annual rate since August 2013.
Later today, investors will eye the ISM manufacturing PMI report in the US which is expected to show a drop for December. However, a downside surprise is likely to raise concerns that economic activity in the US is facing headwinds from a global slowdown.
Euro – European Markets
The revised Markit report released earlier today confirmed that Germany’s manufacturing sector expanded for December in line with expectations while the performance of Euro zone’s manufacturing sector improved less than anticipated last month. With dismal manufacturing activity in several nations of the Euro bloc, including France and Italy, expectations of monetary action by the ECB have risen. In fact the ECB Chief, Mario Draghi, retained a dovish tone in an interview earlier today. He indicated that possibilities of the central bank not meeting its price stability targets are higher now and urged politicians of individual European countries to implement reforms and boost recovery in the Euro zone. He further reiterated that prospects of a deflation in the Euro zone remains limited, although the ECB stands ready to introduce a sovereign bond purchase programme in the region, if needed.
Going forward, market participants will keep a tab on consumer price inflation data in the Euro zone next week, especially after various ECB officials raised concerns about deflationary threats to the region.
Other Currencies – Highlights
The Canadian Dollar is trading on a weaker footing against the greenback this morning ahead of the RBC manufacturing PMI report in Canada. This report will be eyed to gauge the health of the nation’s industrial activity for December, especially after manufacturing activity for the previous two months registered its strongest levels since November 2013. However, prospects of a downside surprise in today’s update cannot be ruled out, particularly considering the recent slump in global oil prices which might have weighed on Canada’s domestic activity last month.
With no other crucial macro updates today in Canada, market participants will keep a tab on the ISM manufacturing PMI reading in the US for further direction to risk appetite. Furthermore, with crucial labour market reports in Canada and in the US next week, investors in the US Dollar-Canadian Dollar pair are expected to remain on their toes.