UK Manufacturing Activity Expands in July
The just released survey data indicated that activity in Britain’s manufacturing sector expanded at a slightly better than anticipated pace for July. Later this week, the BoE will hold its monetary policy meeting, with the minutes likely to show that rate setters were divided over the decision on whether to raise interest rates, with policy hawks pushing for an increase.
In Europe, the final manufacturing PMI from Euro zone and its largest economy for last month came in ahead of earlier estimates despite concerns surrounding the Greek debt crisis earlier in July. Across the Atlantic, the spotlight shifts to ISM manufacturing gauge and core personal consumption expenditure data, due later today which could bring in fresh perspective to the timing of the US Fed’s interest rate decision.
Pound Sterling – UK Markets
The just released data showed that activity in the UK manufacturing sector rose more than expected last month. However the pace of growth in new orders slowed to the lowest since September last year, indicating that that factory sector could continue to act as a drag on overall economic growth. Going forward, market participants will keep a tab on services PMI numbers scheduled later this week as economic recovery in the UK remains increasingly reliant on consumer spending in the nation. Meanwhile, Sterling has hardly reacted to the factory activity data and continues to trade in a close range against its major currency counterparts this morning.
Moving ahead, attention will drift towards Bank of England’s monetary policy meeting later in the week. While the nine-member monetary policy committee is expected to keep interest rates on hold in this gathering, the vote count could show a split in the policymakers’ views following the recent flow of upbeat economic releases that have signalled an improvement in economic recovery in the current quarter.
US Dollar – US Markets
The US Dollar is trading in a narrow range against the Pound this morning, ahead of notable economic releases including US personal spending and income data for June which will be followed by updates on manufacturing activity in July. Following a dip in consumer confidence for July, reported by the University of Michigan’s last week, markets anticipate a similar deceleration in today's spending data. A higher than expected drop in spending could raise concerns about consumer spending and the pace of economic growth at the start of the current quarter. On the other hand, the Institute for Supply Management is expected to print a modest growth in manufacturing activity for the last month.
On Friday, the greenback traded broadly lower against its key peers after the US labour department reported that employment costs rose at the slowest pace ever recorded for the second quarter which slightly pulled back expectations that Fed would tighten monetary policy in its September meeting.
Euro – European Markets
The final manufacturing activity print from the Euro zone and its various economies marked the start to this week’s economic releases in the Euro area. The final reading of Euro zone’s manufacturing sector showed that growth in factory output was better than previously estimated for July, amid a weak Euro and ECB’s aggressive monetary policy measures. However, prints from individual countries paint a mixed picture, with pockets of growth and decline.
Data confirmed that the French manufacturing sector fell back into the contraction territory in July, as expected. Meanwhile, factory activity in the Euro zone’s largest economy was better than earlier estimates. A weaker Euro and lower borrowing rates seem to have helped German manufacturers. On the other hand, the manufacturing PMI for Spain indicated that activity in its manufacturing sector dropped to a nine month low in July. Greek manufacturing activity also dropped sharply in July from the previous month. The Euro is trading lower against the majors’ post the economic releases.
Other Currencies – Highlights
The US Dollar – Japanese Yen is hovering near the 124.00 mark, with the greenback recovering from its early session losses. Investors now shift their attention to the core personal consumption expenditure index and the ISM manufacturing PMI readings in the US for further direction in the currency pair.
The Japanese manufacturing PMI print that came in earlier today failed to lend support to the Japanese Yen. The final survey data revealed that manufacturing activity in Japan for July accelerated at the fastest pace in five months, though it was slightly lower than initial estimates. The data suggests that economic growth in the world’s third largest economy is slowly recovering heading into the second half of the year after a dismal quarter that ended in June. Going forward, the Bank of Japan’s interest rate decision meeting accompanied by the speech of the central bank Governor Haruhiko Kuroda, scheduled in the final session of this week, will draw significant market attention.