UK Construction Sector Keeps Growing Strongly
The global economic calendar is relatively quiet today in what is a very busy week for data releases. Nevertheless the just out UK construction report is likely to draw some attention after the data print matched expectations for October, supporting optimism about the health of the nation’s economy. Scheduled tomorrow, Britain’s service industry data, which accounts for the majority of the nation’s business activity is a noteworthy release.
Across the Atlantic, factory orders data is up for release later in the day and will be eyed to gauge the health of the US economy. Amid a data-quiet calendar day in Europe, the ECB President’s speech today will hog the limelight.
Pound Sterling – UK Markets
Activity growth at Britain’s factories unexpectedly picked up in October, to record its best month since June 2014, offering a bright spot for the UK manufacturing sector which has been dogged by recession since the start of the year. The Pound was trading on a firmer footing against the major currencies yesterday following the publication of the survey. The upbeat survey suggests that the improvement in the nation’s manufacturing sector for October will contribute to growth in the final months of this year.
Coming after yesterday’s strong manufacturing report, the just released UK construction sector activity expanded in line with market forecasts for October, buoyed especially by commercial building work. The BoE policymakers who are due to meet this week will likely be encouraged by positive October reports of the UK manufacturing and construction sector. But, it is widely anticipated that the board will wait for further improvement before deciding to raise interest rates from a record low. Also, data from the dominant UK services sector will be eyed tomorrow in hopes of more positive news for the private sector economy.
US Dollar – US Markets
Sentiment for the greenback against its key peers weakened yesterday after the ISM manufacturing gauge indicated that the overall manufacturing activity growth remained stalled in October on account of weak global demand. Even though the ISM manufacturing data printed above expectations in the US, the actual reading was the weakest since May 2013. The nation’s producers continued to suffer as they faced headwinds from the stronger US dollar, soft overseas markets and energy sector woes. But, Markit’s final PMI survey results offered a substantially brighter outlook for the US manufacturing sector for October.
Meanwhile, the ISM report also provided some signs of optimism yesterday. The ISM’s new orders measure climbed in October on the back of demand for automobiles. The hard data via factory orders later today will confirm if the firms saw any jump in new order inflows lately. Market expectations are for today’s September report on factory orders to reflect a reduced pace of decline. But the bearish trend in factory output growth will likely dominate.
Euro – European Markets
The shared currency is trading lower against the Pound this morning, amid a light economic calendar day in the Euro land and the UK today. The ECB President, Mario Draghi, will present a speech later in the day where currency traders will closely monitor his remarks on the possibility of more stimulus measures before the end of this year. Apart from that, investor focus will be on global macroeconomic and political news that could trigger volatility in the Euro against its major currency counterparts in the session ahead. Looking ahead, a slew of services PMI data from the Euro zone and its peripheries will dominate market attention in tomorrow’s trading session.
Earlier today, Spain’s unemployment data for October generated more evidence that the recent recovery witnessed in Europe’s fourth largest economy has peaked. The number of jobless workers in Spain climbed more than expected for October, fuelling doubts about the growth outlook for Spain and implying the same for the Euro zone. Yesterday’s sentiment data for Spain had indicated that activity in the nation’s manufacturing sector grew at a sluggish pace in the previous month.
Other Currencies – Highlights
The Aussie Dollar soared higher against the greenback earlier today, following Reserve Bank of Australia’s (RBA) decision to keep its interest rate unchanged for the sixth consecutive month and in line with market expectations. The RBA Governor, Glenn Stevens, in the accompanying rate statement, justified the central bank’s decision to hold the cash rate steady as business surveys in recent months have suggested an improvement in economic conditions. The pickup in activity along with stronger growth in employment and a steady rate of joblessness has raised the prospects for the Australian economy. The policy setters also noted that they would continue to assess the inflation outlook, signalling that the bank was open to further easing of monetary policy to support the economy if needed.
Later in the day, market participants will keep a tab on Australia’s AiG performance of services index and trade data along with US economic data on factory orders for further direction in the currency pair.