UK Construction PMI Rebounds in September
Second-tier economic releases dominate the subdued global economic calendar today. The UK’s construction purchasing manager’s index (PMI) has unexpectedly swung into the expansionary territory for September.
Later in the session, the Eurozone’s producer price index for August is up for release. Across the Atlantic, the IBD/TIPP economic optimism index and the ISM New York index are due today.
Pound Sterling – UK Markets
The Pound has extended its previous session losses against the US Dollar and the Euro this morning. The just out data showed that UK’s construction PMI unexpectedly returned to growth in September. Until now, the indicator has posted 3 consecutive readings below the 50 level threshold, which indicates contraction. The nation’s consumer inflation indicator i.e. the BRC shop price index, is scheduled for release later in the day.
Yesterday, Sterling slumped to a 3-month low against the greenback and hit a 3-year low against the Euro, as market participants were spooked by “Hard Brexit” talks after the British Prime Minister (PM), Theresa May, set a March deadline to start the formal process of exiting the European Union. The PM has made it clear that she won’t sign a deal that will limit Britain’s ability to curb immigration in exchange for full access to the single market. Investors interpreted this as a sign of a hard landing for Brexit talks. Separately, activity in the UK's manufacturing sector surprisingly surged in September.
US Dollar – US Markets
The greenback strengthened against its major peers yesterday. Data indicated that the US ISM manufacturing activity index rebounded in September after unexpectedly shrinking in August, as manufacturers signaled a moderate upturn in both production volumes and incoming new orders during the month. The final Markit manufacturing PMI reading also advanced in September. On the other hand, US construction spending fell for the second consecutive month in August, touching its lowest level in 8 months, dragged down by weakness across public and private sectors, suggesting that home building might not contribute to America’s economic growth in the third quarter.
The US Dollar is trading positive against the Pound and the Euro this morning. Today, market participants will focus on the US economic optimism and ISM New York index, while later in the week the US nonfarm payrolls for September remains a crucial data point.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. The Eurozone economic calendar is taking a breather today with just 2 second-tier economic releases: the number of unemployed people in Spain rose during September, and we await the Eurozone’s producer price index (PPI) data for August which is expected to hold steady.
Yesterday was a pretty busy day, with lots of manufacturing activity indicators spread across the Euro area. The final reading of the Eurozone's manufacturing sector confirmed that factory activity advanced to a 3-month high in September. 6 of the 8 nations covered by the survey experienced growth in their manufacturing sectors. Among these, Germany led the way. The nation’s final manufacturing PMI came in line with its preliminary estimate for September.
Other Currencies – Highlights
The Australian Dollar briefly rose against the greenback this morning, after the Reserve Bank of Australia (RBA) left key interest rate steady at a record low 1.50%, as widely expected. The new RBA Governor, Philip Lowe, also sounded broadly neutral and didn’t signal any bias to ease again, indicating that the unchanged stance was consistent with sustainable growth in the economy and in order to achieve the central bank’s inflation target over time. As a result, market participants pared expectations of further easing by the RBA.
In other economic news, Australian building permits dropped less than expected for August and a private measure of the nation’s manufacturing activity remained in contraction territory for the second consecutive month in September. Looking ahead, Australia’s domestic economic calendar this week includes some key releases such as the retail sales and trade balance along with the AiG performance of services and construction indices data.