Manufacturing in Focus at the Start of 4Q
Pound Sterling – UK Markets
In yesterday’s trading session, the Pound – US Dollar currency pair initially rallied during the course of the day after a revised set of second quarter UK GDP figures confirmed robust economic growth. However, annual growth for the quarter was revised lower to 2.4%, fuelling doubts whether the Bank of England would tighten its monetary policy early next year or hold fire until mid – 2016. Sterling, meanwhile, lost ground against the US Dollar and the Japanese Yen in the later part of the trading session, on the last trading day of the month and the third quarter.
Investors are likely to have become cautious about economic growth in the third quarter after just out data showed that factory activity in the UK eased to a three month low for September, though the decline was smaller than expected. The manufacturing gauge points to broader moderation in the nation’s economic activity in the third quarter and suggests that economic growth slowed during the July –September period. Meanwhile, the Pound hardly moved against the greenback, post the release of the economic data.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the common currency this morning ahead of a pair of updates related to US manufacturing activity and a separate report on weekly jobless claims scheduled later in the session. Based on forecasts for today’s release from the Institute of Supply Management, data is anticipated to show weakness in factory activity at the end of the third quarter, with the index likely to have moved closer to the contraction territory. Additionally, the final Markit’s manufacturing PMI is expected to print a similar story for September, as the nation’s export orders continue to get affected by the strength of the home currency. Yesterday, the latest Chicago PMI did little to assuage concerns of weakness in activity across the US manufacturing sector after the index slipped to a four month low for September.
In the wake of stronger than expected ADP payrolls numbers for September, it is likely that today’s update on jobless claims for last week will be in line with recent trends suggesting strength in the US labour market.
Euro – European Markets
The Euro continued to descend against its major currency counterparts this morning, in response to a slew of manufacturing PMI data that were released earlier today in the Euro zone and its peripheries. Revised numbers from the Euro zone’s two largest economies, which were published earlier in the day, indicated that activity in Germany’s manufacturing sector eased below market estimates, while France saw a slight pickup in factory activity. In addition, latest manufacturing PMI data in Spain and Italy indicated easing of factory activity for the last month, implying that weakness in the manufacturing sector has spilled over to the wider economy. In the Euro zone, manufacturing growth eased to a five month low for September on the back of slower pace of new orders and output.
The shared currency lost ground against its key peers yesterday after data showed that the Euro zone slipped back into deflation territory for September, thus elevating pressure on the ECB to expand its asset buying programme in order to support growth in the Euro region.
Other Currencies – Highlights
The Swiss Franc is currently trading on a weaker footing against the US Dollar, as the greenback extended its upward momentum earlier today, following the nation’s strong private sector employment growth for September yesterday. Also, Switzerland’s retail trade and SVME manufacturing PMI data that came out earlier today have added to losses in the Swiss Franc against the US Dollar. In Switzerland, August real retail sales data surprised to the downside, as the measure dropped to post a negative growth for August. In separate data, Switzerland’s PMI index slipped back into the contraction territory for September, after the manufacturing sector had shown improvement in August. The decline suggests that the nation’s manufacturing sector has failed to show resilience in the face of a strong Swiss Franc and renewed global economic growth concerns.
Later in the session, the US Dollar – Swiss Franc currency pair will mostly be influenced by a string of US economic data including manufacturing PMI and jobless claims, in the absence of any major data in Switzerland.