UK Construction PMI Drops
Sterling has shown little reaction to today’s construction PMI data which indicated that the pace of construction sector activity in the UK slowed for November. Market participants will now keep a tab on tomorrow’s services PMI numbers that are expected to show an improvement, in sync with yesterday’s encouraging manufacturing numbers which had led the Pound to breach the 1.57 mark against the US Dollar.
Across the Atlantic, yesterday’s ISM survey showed that manufacturing PMI in the US dropped less than expected for November. In the Euro zone, traders will eye today’s producer price inflation data for further direction, especially after yesterday’s soft manufacturing PMI numbers strengthened prospects of deflation in the region going forward.
Pound Sterling – UK Markets
The just out construction PMI data has shown that the pace of activity in Britain’s construction sector eased more than expected for November, but remained well above the expansion mark. With signs of a slowdown in the UK housing market due to tighter mortgage lending measures introduced by the BoE, prospects of a further slowdown in the construction sector cannot be ruled out going forward. Later this week, market participants will eye the BoE’s policy meeting where the central bank is expected keep its policy stance unchanged. Uncertainty continued to build over the timing of an interest rate rise in the UK, especially with the tone of recent BoE publications remaining mixed.
Yesterday, the Pound gained ground against the majors following the release of mostly upbeat macro data in the UK. Data indicated that manufacturing activity in the UK rose unexpectedly to a four month high for November, as domestic demand remained well supported to compensate for weakness in exports. Separately, other macro updates in the UK revealed that the number of mortgage approvals declined, but net consumer credit rose at a healthy pace for October.
US Dollar – US Markets
The US Dollar lost ground against the majors yesterday despite the release of an upbeat ISM manufacturing PMI report in the US. Data showed that the pace of activity in the manufacturing sector eased less than expected for November. However, the report revealed that the pace of hiring in the sector slowed and prices of raw materials dropped sharply in the US. Against this backdrop, the non-farm payrolls report in the US due later this week will be closely watched to ascertain the strength of the labour market in the world’s largest economy.
The greenback is trading in a tight range against its key peers this morning. With no notable domestic macro releases today, construction spending numbers for October will be eyed in the US to get an insight into the health of the housing market during the last quarter of 2014. The survey is expected to show that construction spending rebounded for October after registering a drop for the last two months. Additionally, producer price inflation numbers in the Euro zone scheduled later today will keep investors in the Euro-US Dollar pair interested.
Euro – European Markets
The Euro is trading in a tight range against the majors this morning ahead of today’s producer price inflation data in the Euro zone, which is anticipated to show that producer prices on an annual basis continued to drop for October, albeit at a slower pace. Moving ahead, traders will keep a tab on the ECB’s policy meeting scheduled later this week where the central bank is unlikely to announce any further stimulus measures. However, market participants will keep a tab on the central bank Chief’s post-meeting press conference for cues to the ECB’s policy stance going forward.
Yesterday, the revised Markit manufacturing PMI readings in Germany and France revealed that industrial activity in the two largest European economies contracted for November. Additionally, Euro zone manufacturing PMI numbers were downwardly revised amid weak growth in business investments and export orders last month. With low inflation seemingly taking a toll on the region’s manufacturing sector, prospects of deflation cannot be ruled out in the common currency bloc going forward.
Other Currencies – Highlights
The Aussie Dollar gained ground against the greenback in today’s trading session after the Reserve Bank of Australia decided to keep its stance unchanged at its policy meeting held earlier today. The RBA Governor, Glenn Stevens, indicated that the Aussie Dollar is trading above its estimated fundamental value and a weaker currency is needed to achieve balanced economic growth. Additionally, he indicated that domestic wage growth is expected to remain modest, but inflation is likely to remain in the central bank’s target range. However, the Aussie Dollar pared most of its gains later in the session today. Investors will look for hints related to an interest rate cut in Australia going forward, especially after the RBA Deputy Governor indicated last week that the central bank stands ready to ease its monetary policy, if needed.
Going forward, market participants will keep a tab on tomorrow’s GDP data for the third quarter in Australia for further direction. Additionally, with the Australian trade data and the US labour market report scheduled later this week, the Aussie Dollar-US Dollar pair is expected to witness some volatility.