Remarks by the US Fed Chair to Gain Focus
A speech by the US Fed Chief, Janet Yellen, is likely to hog the limelight in today’s trading session, with market participants pouring over the detail for hints on the timing of a rate rise in the US. Furthermore, durable goods orders data and the weekly jobless claims print in the US will also attract investors’ attention later today.
In the UK, data just out has shown that mortgage approvals rose at a healthy rate for August. In Germany, today’s GfK survey showed a slight deterioration in consumer morale for October while the Ifo report exhibited a slight improvement in the nation’s business climate for September, despite concerns about the Chinese economy.
Pound Sterling – UK Markets
A print just released by the British Bankers’ Association showed that mortgage approvals in the UK rose for August, above the 40K mark for a fifth straight month. This report has affirmed that growth in the nation’s housing segment activity remained healthy, as an improvement in labour market conditions and weak inflation in Britain continued to buoy domestic morale. However, Sterling has shown little reaction to today’s data and has continued to trade in a tight range against the greenback. Moving ahead, investors will keep a tab on a speech by the US Fed Chief, Janet Yellen, in the latter half of the trading session.
Yesterday, the BoE Deputy Governor for Monetary Policy, Ben Broadbent, expressed confidence in Britain’s labour market health and stated that wage growth in the country is anticipated to pick up going forward, as the negative influence on wages from the recent surge in low paid jobs abates. Meanwhile, with little else on the macroeconomic front in the UK yesterday, the Pound remained under pressure against the US Dollar following the release of the downbeat manufacturing PMI reading in China.
US Dollar – US Markets
The US Dollar is trading under pressure against most of its peers this morning ahead of the Fed Chief, Janet Yellen’s speech later during the day. In the most recently concluded FOMC meeting, the central bank Chief did not offer hints with regards to a rate rise. Hence, investors will closely follow her speech today for clarity on the outlook of the world’s largest economy along with a probable timing to raise the key rate. Additionally, investors will pay close attention to the release of US durable goods orders data for August which is expected to show a decline, after registering a rise in the previous month.
In yesterday’s trading session, the greenback lost ground against the Euro after the Markit manufacturing PMI remained at a 22-month low level for September. Additionally, Markit reported that rising concerns over the global economic outlook and fragile new order growth in the US lead to a cautious job hiring across the manufacturing sector this month. Meanwhile, the Atlanta Fed President, Dennis Lockhart, urged investors to concentrate more on the strength of the US economy rather than risks related to the global slowdown.
Euro – European Markets
The Euro–US Dollar currency pair is hovering close to the 1.12 mark this morning, extending its previous session gains, after the ECB Chief, in his testimony to the European Parliament yesterday, stated that the central bank currently is not sure whether present risks to the economic outlook of the common currency bloc were permanent or transitory in nature and hence it was too early to decide about any expansion in its current monetary stimulus programme. Additionally, the Euro received a boost after Mario Draghi assured that the ECB’s current stimulus program “has sufficient built-in flexibility” to address any continuous weakness in the outlook for growth.
Earlier today, data showed that Ifo business climate in Germany surprisingly improved for September. However, another data released by GfK earlier in the day indicated that consumer confidence in Eurozone’s largest economy deteriorated for the second consecutive month for October, as German consumers were worried about the economic consequences of the large influx of migrants.
Other Currencies – Highlights
The Japanese Yen started its trading session today on a stronger footing despite the latest Nomura/JMMA survey report for September showing that Japan’s manufacturing sector expanded at its slowest pace since June, following a sharp reduction in new export orders. However, the PMI reading continued to stay in expansion territory for the fifth consecutive month. Till now, the Bank of Japan has not given any hints as to whether it would increase its monthly purchases of government bonds, currently at ¥80 trillion. Despite the signs of a slowdown, traders are not expecting the BoJ to initiate additional stimulus as the central bank governor in his latest speech had stated that the Japanese economy will accelerate in the third quarter.
Meanwhile, the Ministry of Economy, Trade and Industry reported that Japan's all industry activity index for July rose for the second consecutive month, defying market expectations for the index to remain flat. Going forward, investors will turn their attention to the release of Japan’s national CPI data slated early tomorrow, which is expected to show weakness amid declining energy prices.