UK Industrial Production Rebounds in August
Upbeat UK manufacturing and industrial output data for August has buoyed the Pound against its key peers. While the data has lent support to Sterling, the recent batch of weak UK economic updates.
suggests that the British economy is facing headwinds for industrial activity. The data comes as the BoE convenes for its latest interest rate decision meeting.
Meanwhile, in Europe, data earlier today indicated that Germany’s August industrial production slumped at its fastest pace in a year, giving rise to fears that the economy was impacted by slowing growth in China. Across the Atlantic, Fed’s report on consumer credit and mortgage applications data might attract some market attention.
Pound Sterling – UK Markets
This morning the Pound – US Dollar currency pair made further gains after the just released UK industrial and manufacturing production data showed that activity rebounded in August. Although the manufacturing output data was better than market expectations for August as auto plants came back online after summer shutdowns, the sector has continued to show signs of weakness in recent PMI releases. Also, the outlook for the nation’s manufacturing sector looks challenging, with recent surveys such as the CBI industrial trends and PMI displaying signs of softness in activity in the previous month.
In the session ahead, market focus will shift towards NIESR’s September estimate for UK GDP for the trailing three month period which could trigger further movement in the Pound against its key peers. Investors will look to confirm evidence of slowing economic growth after this week’s update of the services PMI showed a slowdown in sector growth. Meanwhile, the IMF yesterday expressed optimism in the nation’s growth prospects.
US Dollar – US Markets
Sentiment for the greenback against the Pound continues to remain subdued this morning. In the US, a weekly update on applications for home mortgages and Fed’s report on consumer credit is scheduled for release later in the day. The consumer credit report could shed some light on whether consumers were willing to use their credit cards again in August amid renewed concerns regarding global economic growth. Going forward, spotlight will be on the Fed minutes of the September monetary policy meeting due for release tomorrow, which would provide further clarity on why the US central bank decided to delay raising its benchmark interest rate last month. The FOMC meeting minutes will also be keenly watched for better understanding on when the central bank might start the ascent of its borrowing costs.
The US Dollar slipped lower against the major currencies yesterday after a report showed that trade deficit in the US widened more than expectations in August, as exports fell to its lowest level in three years, raising doubt on the Fed's plan to increase rates this year.
Euro – European Markets
The shared currency surrendered part of its previous session gains against the US Dollar and the Pound after data released earlier in the day showed that German industrial production unexpectedly fell in August at the fastest pace in a year, indicating that Europe’s largest economy might have lost some momentum in the third quarter. Today’s weak German industrial production data follows a sharp drop seen in the nation’s factory orders for August that was published yesterday. Recent data prints in the Euro zone’s biggest economy have painted a picture of caution for the German economy, in the wake of waning demand from China and other emerging markets. Meanwhile, France posted a narrower trade deficit for August which was helped by a fall in the nation’s imports. Markets had anticipated the trade deficit to widen in August. However, data from Europe’s second biggest economy failed to halt the Euro’s descent against the majors.
Tomorrow, markets will eye German trade and current account data for further cues to confirm that the economy lost steam in the third quarter.
Other Currencies – Highlights
The Japanese Yen has recovered moderately against the US Dollar following Bank of Japan’s decision earlier today to keep its monetary policy steady, despite the economic growth outlook being threatened by slumping exports and inflation outlook challenged by falling oil prices. As widely expected, the Japanese central bank maintained its pledge to raise base money at an annual pace of JPY80.00 trillion ($666.00 billion) through aggressive asset purchases. The BoJ Governor, Haruhiko Kuroda at the press conference reiterated the bank's stance that the massive stimulus measures will eventually lift the world's third-biggest economy decisively out of nearly two decades of deflation. The bank left its assessment of the economy unchanged from the previous meeting, with the Governor maintaining his optimistic view that Japan’s economy continues to recover moderately.
Meanwhile, the IMF in its semi-annual World Economic Outlook has estimated that Japan’s economy will expand at a slower rate this year than previously forecasted. Later today, investors will eye a pair of US economic reports due for further direction.