In a busy day for economic releases, the just released UK manufacturing PMI indicated that activity in the sector for August expanded at a slower than expected pace, showing signs of weakness in the third quarter. Separately, the number of mortgage approvals edged higher than market expectations for July, suggesting strong homebuyer confidence amid record low borrowing rates.

The Euro has rallied against the majors today even after data showed that Euro zone’s factory growth eased last month, missing expectations of an unchanged reading. Across the Atlantic, investor focus will be on keynote ISM manufacturing survey for August, with markets anticipating slight weakness in the advance reading.

Pound Sterling – UK Markets

Following a bank holiday yesterday, currency traders this morning were welcomed with a slew of UK economic releases including manufacturing activity data for August, mortgage approval numbers and consumer borrowing data. Data released just now indicated that growth in Britain’s manufacturing sector slipped below market expectations for August amid a backdrop of difficult conditions including slow growth in the nation’s largest export market and a strong Pound which weighed on competitiveness. The sluggish performance of UK’s export oriented manufacturing sector will likely remain a drag on growth in the UK economy in the third quarter. The Pound has lost ground against the US Dollar, post the lackluster output growth data in the UK.

In separate data, the number of mortgage approvals rose above market consensus for July, consistent with recent signs that activity in the UK housing market has picked up. Also, consumer borrowing in the nation advanced as expected for July.

US Dollar – US Markets

After a fairly volatile trading month, investors will look for fresh evidence in September’s economic releases to gauge the strength of the US economy at the end of the third quarter and timing of the Fed interest rate rise. During the weekend, expectations of a possible monetary policy tightening in September made a comeback after Deputy Fed Chairman Stanley Fischer’s remarks suggested that a rate rise was in offing in the near term. Going forward, investors will be on their toes ahead of August’s nonfarm payrolls data and the ISM manufacturing and services PMI readings this week.

The US Dollar is trading on a weaker footing against the Euro this morning ahead of updates on manufacturing activity in the US for August. Markets anticipate that the August US ISM manufacturing PMI will reflect a slightly weaker pace of expansion, as a combination of a stronger domestic currency and slowing global growth weighed on the nation’s manufacturing sector. Also of particular importance would be the print’s sub index of employment, to gauge if the August nonfarm payrolls misses or exceeds expectations.

Euro – European Markets

The Euro managed to hold on to its recent gains against the Pound yesterday after most of the data releases from Europe were positive. Euro zone’s preliminary headline CPI for August remained unchanged from the previous month despite anticipations of a downside, while the core measure matched market expectations.

This morning, the shared currency is trading higher against most of its major counterparts. A string of manufacturing PMI readings from the Euro zone and its various economies were released earlier in the day. Though the figures did not provoke much market reaction, the numbers were still encouraging especially in Spain and Italy as activity in their respective manufacturing sectors remained comfortably in the expansion territory for August. In Germany, data showed that the final manufacturing PMI figure was revised upwards, while the number of unemployed individuals in the nation declined more than expected, for August. However, the revised PMI figures in the Euro zone missed its preliminary estimate, raising some concerns among Euro investors.

Other Currencies – Highlights

The RBA earlier today left the cash rate unchanged at a record low of 2% as widely expected, following reductions in May and February. The decision follows a volatile month in equity markets amid intensifying concerns about a slowdown in the Chinese economy which is Australia’s largest trading partner. The RBA Governor Glenn Stevens, in his policy statement, assured that the Australian economy was experiencing moderate expansion and hence the current stance on monetary policy was appropriate. He also noted that the nation’s central bank was aware of the risks posed by plunging commodity prices and potential weakness in the global economy, particularly China. The Australian Dollar is trading in a tight range against the US Dollar, as investors remain cautious after mixed reports on Chinese manufacturing activity.

Economic data released earlier today showed that Australian current account deficit for the April-June quarter widened more than market projections. Separately, building approvals in Australia surpassed expectations for July, however the upbeat data had little impact on trading in the Aussie against the greenback.