Data just out indicated that domestic manufacturing activity slowed unexpectedly for September, although it continued to remain in the expansion phase. Against this backdrop, market participants will closely watch this week’s construction and services activity reports to gauge whether the nation was able to sustain the pace of growth during the third quarter.
Across the Atlantic, investors will keenly eye today’s ADP employment data to ascertain the pace of recovery in the nation’s labour market ahead of Friday’s official non-farm payrolls report. With increasing threat of deflation in the Euro bloc as evident by yesterday’s weak Euro zone consumer price inflation data, markets will keep a close watch on tomorrow’s outcome of the ECB’s monetary policy meeting for further direction.
Pound Sterling – UK Markets
The Pound edged lower against most of its major peers this morning and is trading below the 1.62 mark against the US Dollar after data just released indicated that manufacturing activity in the nation unexpectedly weakened for September, thus knocking expectations of a steady recovery in the sector. However, market attention has now shifted to construction and the all-important services sector reports scheduled later this week for further insights into the nation’s recovery during the third quarter. Additionally, investors in the Pound-US Dollar pair will keep a close watch on today’s string of crucial economic data in the US for further direction to risk appetite.
In yesterday’s trading session, Sterling nudged lower against the US Dollar after data indicated that current account deficit in the UK widened unexpectedly for the second quarter. With growth in Euro zone, its largest trading partner, still weak, it remains to be seen if the current account balance shows signs of improvement in the coming months. At the same time, another report confirmed that the nation’s economic growth remained on track for the second quarter.
US Dollar – US Markets
The greenback is trading in a tight range against its major peers this morning ahead of today’s crucial domestic macro triggers. The ISM report in the US is expected to show a marginal deterioration in manufacturing activity for September, but remain largely above the expansion mark and keep investor outlook mostly unchanged towards the nation’s healthy manufacturing sector. Additionally, the ADP data is likely to show an improvement in the jobs market for September and indicate that more than 200K people gained employment for the fourth straight month. The numbers will be scrutinised before Friday’s official labour market report, especially after the recent Markit survey showed that the pace of hiring in the manufacturing sector remained upbeat for September.
The greenback gained ground against the majors in yesterday’s trading session, despite data released in the US showing a more than expected drop in consumer confidence for September. Weak consumer price inflation data in the Euro zone also prompted traders to shun the Euro and move towards the greenback yesterday.
Euro – European Markets
The Euro lost ground against the greenback and briefly slipped below the 1.26 mark yesterday following downbeat Euro zone headline inflation and German labour market data. The annual consumer price inflation reading in the Euro zone eased in line with market estimates, however, the core inflation figures dropped unexpectedly for September, strengthening prospects of the region embracing deflation in the future. Additionally, Germany reported an unexpected rise in the number of unemployed people for September, heightening concerns that the Euro bloc might be drifting into another recession.
The Euro is trading under pressure against the greenback this morning. Today’s final PMI readings across key European nations revealed that manufacturing sector activity in Germany and France contracted for September. With the ECB policy meeting scheduled tomorrow, markets participants are expected to remain on the sidelines amid uncertainty surrounding further stimulus measures in the Euro zone. However, the ECB President, Mario Draghi, is anticipated to maintain his ultra-dovish stance, as economic health of the region has shown little improvement.
Other Currencies – Highlights
The Canadian Dollar gained ground against the greenback in yesterday’s trading session after the Conference Board’s survey in the US showed a sharp deterioration in consumer morale. Meanwhile, data released in Canada showed that the nation’s GDP remained surprisingly unchanged for July, as a slowdown in mining and oil and gas sectors weighed on economic growth.
Markets will keep an eye on today’s RBC manufacturing PMI report for September to gauge whether the sector continued to improve for the fifth straight month. With no other domestic macro triggers, the Canadian Dollar is anticipated to remain supported against the majors after China reported encouraging manufacturing PMI numbers earlier today. Additionally, markets will keep a tab on today’s ISM