Pound Higher Following UK Manufacturing PMI
The start of February brings a busy day of economic news, wherein the focus will largely be on the state of the manufacturing sector of the major economies across the globe. The performance of the UK manufacturing sector had a better than expected start to 2016 on the back of improved domestic demand. Meanwhile, in the Euro zone, the manufacturing barometer came in line with the flash estimates for January, suggesting that the economy expanded at a moderate growth rate in the first quarter of this year.
Across the Atlantic, a string of US economic data including personal income and spending data, PCE inflation numbers, ISM Manufacturing PMI and construction spending data are scheduled for release later in the day.
Pound Sterling – UK Markets
Earlier in the day, the Pound – US Dollar currency pair partly recovered from its losses as markets continued to assess the recent set of disappointing US macroeconomic data. Sterling has currently expanded its gains against the greenback after the just released UK PMI report indicated an unexpected uptick in manufacturing activity growth for January, shrugging off a number of potential headwinds including global financial market volatility and heavy rain and flooding in areas where factories are based. The index has been losing ground since November last year but the manufacturing PMI in January jumped above market estimates to remain safely in expansionary territory. The increase in factory output growth was due to improved inflows of new work from the local market. However, the trend in new export orders fell back into negative territory.
In other economic news, net lending to individuals in the UK was slightly smaller in December when compared to the previous month. Separately, official data indicated that UK mortgage approvals unexpectedly rose in December, signaling a buoyant housing market.
US Dollar – US Markets
The US Dollar was little changed against its key currency counterparts on Friday despite government data indicating that US economic growth slowed sharply in the final three months of the previous year. Softer consumer and business spending and falling exports due to economic weakness in overseas markets were primarily the major reasons of the economic slowdown in the nation. The disappointing data has likely renewed concerns that the US economy is losing momentum entering into the New Year. Additionally, a survey by the University of Michigan revealed that consumer optimism deteriorated more than anticipated for January due to a rout in stock market and weakened growth prospects in the US economy.
The greenback has nudged lower against the major currencies this morning. Later in the day, investor focus will be on a slew of economic releases, including ISM and Markit’s Manufacturing PMI, construction spending and personal spending data. Today’s data is anticipated to attract significant market attention as investors look for cues that would shed light on the state of the nation’s economy.
Euro – European Markets
The Euro’s recovery mode gained further momentum against the greenback earlier today, moving away from losses posted in the final session of last week. On the data space, markets saw the release of final manufacturing PMI releases from the Euro zone earlier today. According to the final PMI surveys, manufacturing activity in the Euro zone weakened in January. Also, growth in the German factory sector slowed to a three-month low in January and growth in the French manufacturing industry slipped in line with expectations. The survey showed that weaker demand from abroad weighed on growth in manufacturing activities of both the nations.
On Friday, investor sentiment for the Euro was lower against the US Dollar despite a surprise uptick witnessed in the Euro zone’s core consumer prices data for January. The data failed to generate greater optimism amongst Euro traders likely due to the renewed risk of the downturn in oil prices that could weigh on the annual inflation starting in February.
Other Currencies – Highlights
The Aussie Dollar is trading on a weaker footing against the US Dollar today after mixed manufacturing data from Australia’s largest trading partner weighed on the local currency. Earlier, a report indicated that the expansion in Australia’s manufacturing activity slowed for January compared to the previous month, due to weakness in the automotive and mining sectors. However, the Australian Industry Group manufacturing performance index continued to expand for the seventh consecutive month, thus recording the longest run of expansion since the survey began in 2010. Meanwhile, disappointing US growth figures published on Friday limited losses for the Australian Dollar - US Dollar currency pair.
Going forward, market focus will be on the Reserve Bank of Australia’s interest rate decision meeting which is scheduled for tomorrow. Underlying strength in the domestic economy and a strong job market in Australia are anticipated to override the decline in commodity prices, while worries about global demand and currency wars are likely to lead to low chances of an interest rate cut by the central bank.