UK Construction PMI Rises Slower Than Estimated
The PMI data released just now indicated that activity in Britain’s construction industry expanded, albeit at a slower than expected pace for August, lifted by a sustained recovery in residential building activity. Going forward, investor focus will drift towards the nation’s dominant services sector, with the services PMI report scheduled for release tomorrow.
Across the Atlantic, the ADP employment report due later today will provide an early look at hiring trends in the US labour market ahead of the key nonfarm payrolls print on Friday. Also, US factory orders data will draw some market attention. In Europe, today’s producer prices update will provide signs whether deflation risk is on the rise in the Euro region.
Pound Sterling – UK Markets
This morning, the Pound is struggling to hold to on to its previous session gains against the US Dollar, while it has edged higher against the shared currency. In a fairly quiet calendar day in the UK, the just out UK construction PMI report indicated that the sector is comfortably placed in expansionary territory. The pickup in house building activity helped growth in Britain’s construction sector to improve slightly in August, but the expansion was weaker than what markets had anticipated. The upbeat UK construction PMI report had limited influence on trading in Sterling against the Euro and the US Dollar this morning. The data has come a day before the notable UK services PMI report which is expected to attract significant market attention tomorrow.
The Pound-US Dollar currency pair traded just above the 1.53 mark in yesterday’s trading session. An unexpected slowdown in activity in UK’s manufacturing industry for August limited gains in the home currency against its key peers.
US Dollar – US Markets
The US Dollar remained broadly range bound against the common currency yesterday despite the ISM survey showing that activity for August in the US manufacturing sector expanded at the slowest rate since June 2013, reflecting the impact of a renewed slide in oil prices, strength in the home currency and prospects of weaker global growth. A more than expected ease in the nation’s manufacturing PMI reading would make the case for Fed’s interest rate rise this month less compelling. On the contrary, however, sturdy gains in automobile sales and construction spending signalled that consumer spending and domestic demand remain strong and have the potential to contribute to gains in the US GDP growth for the third quarter of this year.
For another perspective on the health of the US economy, July factory orders data scheduled later in the day will be useful to gauge the level of economic activity in the nation. Also, with markets looking for cues on this week’s nonfarm payrolls data, today’s ADP private sector employment gauge is likely attract some investors’ attention.
Euro – European Markets
The Euro – US Dollar currency pair has retreated from its early session gains and slipped below the 1.13 mark this morning. Currency traders will shift their attention to the noteworthy producer prices data in the Euro zone today for further direction. Markets anticipate that today’s July report will show that producer prices, on an annual basis, continued to fall for a twenty fourth straight month, albeit at a slower pace compared to the prior month. The region’s flash consumer prices data earlier this week had indicated that the CPI index remained stable for August, providing evidence of lack of pricing pressures in the economy. Cues from today’s PPI data will be particularly crucial for the Euro traders, ahead of a pivotal ECB monetary policy meeting due tomorrow.
The common currency traded higher against the Pound yesterday, as positive results from Euro zone’s jobs data aided the domestic currency’s upward momentum.
Other Currencies – Highlights
The New Zealand Dollar has managed to hold on to its gains against the US Dollar this morning, but investors remain cautious as concerns about a global economic slowdown triggered by recent volatility in the Chinese equity market continued to weigh broadly on sentiment. Meanwhile, data released earlier in the day revealed that ANZ’s commodity price index for New Zealand prices fell for a fifth straight month in August, thus capping gains in the Kiwi Dollar against the greenback. The fall in commodity prices was led by a slump in diary prices during the month. However, diary product prices rose in the GlobalDairyTrade auction yesterday, signalling a change in market sentiment among diary companies.
Moving ahead, market participants now look forward to the upcoming US macroeconomic data releases which includes ADP employment report which would act as a preview ahead of Friday’s nonfarm payrolls data. Also of importance would be US factory orders data which is likely to shed further light on economic activity in the third quarter.