Theresa May’s Brexit announcement hits Pound hard
The first trading day of October is a busy one. In America it kicks off with September’s update of the US ISM manufacturing survey, taking top billing on the global data docket. Another key focus in the US this week will be the latest report on US nonfarm payrolls, which could cement or dash expectations that the Federal Reserve (Fed) is on track to raise interest rate by the end of this year.
In the UK, Brexit related news dominates headlines after the British Prime Minister, Theresa May, confirmed that Article 50 of the Lisbon Treaty will be triggered by the end of March 2017. Separately, the just released data showed that UK’s manufacturing purchasing manufacturers’ index (PMI) surprisingly advanced in September. Germany’s final manufacturing PMI fell in line with its preliminary reading for September.
Pound Sterling – UK Markets
The Pound has opened this trading week on a subdued note against its major peers. At one point, Sterling dropped to a 7-week low level against the US Dollar this morning, after British Prime Minister Theresa May pledged to trigger Article 50 of the Lisbon Treaty by the end of March next year. Doing so will formally begin a 2-year debate on the severing of the existing relationship between the UK and the European Union. On the economic data front, UK’s manufacturing PMI unexpectedly rose at its fastest pace in over 2 years for September, boosted by a surge in export orders. There will be a few more hard data releases in Britain this week, including industrial production, services PMI and the NIESR GDP estimate for 3 months ended September.
On Friday, Sterling ended higher against the US Dollar and the Euro after data indicated that the British economy grew faster than expected during the second quarter of this year and the nation’s powerhouse services sector recorded robust growth in July.
US Dollar – US Markets
The greenback is trading stronger against the Pound and the Euro this morning. Market participants are keen to see the US ISM and Markit manufacturing PMI’s later today for fresh insights on the nation’s manufacturing sector. US construction spending data, also due today, will also attract significant attention.
The US Dollar weakened against the major peers on Friday. Data indicated that US Reuters/Michigan consumer sentiment index improved in September, for the first time in 4 months, as Americans grew more optimistic about the prospects of higher income households and persistent low inflation. In other economic news, US personal spending was flat on a monthly basis for August, notching its weakest reading since March. Finally, the nation’s Chicago Fed PMI climbed more than expected in September driven by a sharp rise in production, notching its highest level since January 2016.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier in the session showed that the final reading of the Eurozone Markit manufacturing PMI came in line with its earlier reading, as demand increased from both within and outside the Euro area. Meanwhile, German manufacturing PMI rose in accordance with its preliminary reading for September, accelerating to a 3-month high. Spanish manufacturing activity grew in September at the fastest pace since April, with robust growth in new orders and little sign of any impact from a 9-month political deadlock. Also, Italian and French manufacturing PMI’s advanced above expectations last month.
On Friday, data indicated that the Eurozone’s consumer price index hit its highest level since July 2014 in September. However, a measure of core prices which is closely watched by the European Central Bank officials disappointed expectations, remaining unchanged during the month. Separately, the region’s unemployment rate held steady at a 5-year low level of 10.1% in August.
Other Currencies – Highlights
The Swiss Franc is trading lower against the greenback this morning. Data released earlier showed that Switzerland’s real retail sales declined further in September. On the other hand, the nation’s SVME PMI advanced more than anticipated during the same month. Moving ahead, Switzerland’s consumer price index and foreign currency reserves data along with the KOF Institute’s autumn economic forecast are scheduled for release later this week.
On Friday, the Swiss Franc lost ground against the US Dollar, amid speculation that the Swiss National Bank intervened in the foreign exchange market in order to weaken the domestic currency. The central bank often intervenes by selling Swiss Franc and buying the Euro in order to cap the currency’s strength. On the data front, Switzerland’s KOF leading indicator, a measure of Swiss economic situation, rebounded above expectations in September, suggesting that the nation’s outlook remains stable.