UK Manufacturing Activity Falls
Today’s official report is in contrast with Markit’s manufacturing PMI update for October and has indicated that manufacturing activity in the UK dropped unexpectedly for the same period. However, most market attention is on the NIESR report scheduled later today that is expected to provide an insight into Britain’s macro trend for the three months ended November.
Today’s data showed that German trade surplus widened more than expected for October due to a sharp fall in the nation’s imports, thereby raising concerns that demand in the nation is deteriorating. Across the Atlantic, the NFIB small business optimism survey later today is expected to attract some attention, especially after the latest ADP report indicated that hiring pace across small firms remains robust.
Pound Sterling – UK Markets
Data just out has indicated that both manufacturing and industrial production in the UK dropped surprisingly on a monthly basis for October. Investors were anticipating robust domestic demand to keep manufacturing activity in the nation supported, in line with the October Markit report that indicated an improvement in manufacturing PMI. Consequently, Sterling has lost some ground versus the euro. Later today, traders keenly await the NIESR GDP estimate report to gain an insight into the nation’s economic prospects for the three months ended November. The report will gain increased market attention, particularly after the BoE, in its recent quarterly inflation update, lowered its growth forecast on the UK economy for next year.
The Pound gained ground against the greenback yesterday. A BoE MPC member, Martin Weale, in his speech yesterday, offered no signs that he would shift away from his view of an immediate interest rate rise in Britain.
US Dollar – US Markets
The greenback is trading on a weaker footing against its major peers this morning ahead of today’s NFIB small business optimism survey in the US, which is anticipated to show an improvement in morale among small firms for November. Amid signs that confidence among small firms is crawling back towards its pre-recession highs, market expectations have strengthened that the US economy remains resilient to recent global weakness. Later this week, traders will keep a tab on the crucial US retail sales report to confirm if upbeat labour market conditions for November kept domestic spending supported last month. Additionally, with the preliminary Reuters/Michigan consumer sentiment reading scheduled in the US this Friday, investors will eye the report to gauge if confidence remained well supported for the last quarter.
In yesterday’s trading session, the greenback lost ground against its key counterparts amid a light domestic macro calendar. Traders will eye today’s NIESR GDP estimate data in the UK scheduled later today for further direction to the greenback against the Pound.
Euro – European Markets
Data released earlier today showed that trade surplus in Germany widened more than anticipated for October as imports registered a sharper fall compared to exports. The recent weakness in the Euro and a more than expected drop in imports resulted in German trade surplus widening to its second highest reading in 2014. Separately, another report showed that wage earnings in Germany barely grew for the third quarter of 2014. Following the release of today’s German data, the Euro capped its early session gains against the greenback. Going forward, traders will keenly eye the ECB’s TLTRO auction later this week, especially amid prospects of a sovereign bond purchase programme in the Euro zone early next year.
In yesterday’s trading session, the Euro gained ground against the US Dollar following the release of an upbeat Sentix report in the Euro zone, which indicated that morale among consumers improved more than expected for December. The encouraging Sentix confidence report overshadowed weak German industrial production and helped the Euro to move above the 1.23 mark against the US Dollar yesterday.
Other Currencies – Highlights
The Swiss Franc is trading on a firmer footing against the greenback following the release of today’s domestic labour market report for November. Data showed that jobs were added in the Swiss economy, but the seasonally adjusted unemployment rate in the nation remained unchanged last month. With no other crucial domestic macro releases scheduled this week, investors will keenly eye retail sales data in the US due later this week for further direction to the Swiss Franc against the majors. Separately, market participants will keep a tab on the Euro-Swiss Franc pair, which is trading close to the 1.20 mark, thereby strengthening prospects of an intervention by the Swiss National Bank.
In yesterday’s trading session, the Swiss Franc gained ground against the US Dollar following the release of inflation data which showed that consumer prices in Switzerland remained flat unexpectedly on a monthly basis for November. Considering the prospects of deflation in the Euro zone, any downside risks in Switzerland’s headline inflation rate cannot be ruled out.