UK Construction Sector Activity Slows
The UK construction PMI just released has shown a drop for October, although it remained well above the expansion mark. However, considering that yesterday’s manufacturing PMI improved unexpectedly for October, market participants remain nonplussed regarding Britain’s economic performance last month. Against this backdrop, traders will eye tomorrow’s services PMI report to get a better idea about the overall macro trend in the UK.
In the Euro zone, the producer price inflation report is anticipated to show a further drop in prices for September and heighten fears about a potential deflation in the common currency bloc. Across the Atlantic, yesterday’s ISM manufacturing PMI numbers surpassed market estimates, shifting focus on to this week’s crucial labour market report for further direction.
Pound Sterling – UK Markets
Data just out has shown that construction PMI in the UK eased more than expected for October, but remained largely above the expansion mark. Considering that the construction sector remains firmly poised to support Britain’s economic growth for the latter half of 2014, market participants will eye tomorrow’s services PMI data to gain a better insight into the nation’s overall macro picture for October. Going forward, the NIESR GDP estimate and the BoE policy meeting scheduled later this week will be crucial macro events on investors’ radar.
In yesterday’s trading session, the Pound-US Dollar pair moved above the 1.60 mark following the release of an upbeat UK manufacturing PMI reading for October. Data showed an unexpected improvement in Britain’s manufacturing activity last month and dissuaded concerns that domestic activity is slowing. However, Sterling failed to cling on to yesterday’s gains, especially after the ISM manufacturing report in the US surprised market participants on the upside. With US trade and factory orders data scheduled later today, the Pound-US Dollar pair is likely to witness some volatility in the latter half of the trading session.
US Dollar – US Markets
The greenback showed little reaction against the majors to the release of yesterday’s upbeat ISM manufacturing PMI data in the US. The survey showed an unexpected improvement in the nation’s manufacturing activity for October. This was in contrast to September’s downbeat ISM manufacturing PMI reading and durable goods orders report in the US. Against this backdrop, market participants will eye today’s factory orders data to ascertain if overall performance in the US manufacturing sector remained lacklustre for September. Additionally, traders will keep a tab on the US trade report which is anticipated to show that trade deficit in the nation narrowed to its lowest level in seven months for September. However, the prime focus is on the US labour market report scheduled this Friday, which is expected to show that the economy added more than 200K jobs for October.
Meanwhile, the US Dollar is trading in a tight range against most of its key peers this morning. Today’s producer price inflation data in the Euro zone will be keenly eyed for further direction to the Euro-US Dollar pair, which moved above the 1.25 mark earlier today.
Euro – European Markets
The common currency is trading on a firmer footing against the majors this morning. Data scheduled later today is likely to show a further drop in Euro zone producer prices for September and deepen fears of potential deflation in the region. Considering that most of the recent economic data in Europe has been weak, the ECB’s monetary policy meeting scheduled this week will gain significant market attention. With the central bank surprising market participants at each policy meeting lately, traders will eye this week’s meeting to verify if the ECB offers any concrete evidence about its intention to resort to a sovereign bond buying programme. The European Commission’s economic growth forecasts for Euro zone due later today will provide some food for thought to the ECB about the growth prospects of the region’s economy, before taking the crucial policy decision on Thursday.
Meanwhile, the Euro remained range bound against its major peers in yesterday’s trading session following the release of mostly downbeat manufacturing PMI data across key European nations.
Other Currencies – Highlights
The Aussie Dollar gained ground against the greenback and crossed the 0.87 mark in today’s trading session. Data released earlier today showed that retail sales in Australia grew more than anticipated for September. A jump in retail volume was mainly due to robust demand for the recently launched iPhone 6 in Australia. However, gains in the Australian Dollar were capped after the Reserve Bank of Australia kept its key interest rate unchanged at 2.50%, in line with market estimates. Additionally, the policy statement indicated that the RBA was concerned about the slack in the job market, rising house prices and a slowdown in China. This has strengthened concerns that the central bank is likely to keep interest rates low for a prolonged period. Separately, another survey showed that trade deficit in Australia widened more than expected for September, as export growth remained under pressure due to weak prices of key export commodities like iron ore and coal.
With little on the domestic macroeconomic calendar today, market participants will keep a tab on the labour market report in Australia due later this week for further direction to risk appetite.