Data just released indicated that, on an annual basis, the nation’s manufacturing production grew more than expected for August. However, Sterling’s reaction to the report has been muted, as domestic economic reports have given mixed signals on the health of the economy, thereby tainting expectations that the BoE is moving closer to raise interest rates. Nevertheless, today’s NIESR GDP estimate for three months ended September will keep investors on their toes.
With most of the economic data in the Euro area suggesting that the region is facing headwinds, today’s weak German industrial output data has strengthened the prospect of qualitative easing in the region.
Pound Sterling – UK Markets
The just released manufacturing output data have been broadly in line with market estimates, with annual growth surprising investors on the upside. However, this is in contrast with the September manufacturing PMI figures which indicated a slowdown in the nation’s manufacturing sector expansion. The conflicting signals possibly point towards a knock that the British economy took on account of the uncertainty surrounding the Scottish referendum.
The Pound is trading on a firmer footing against the greenback this morning. The NIESR GDP estimate in the UK will be a crucial event in today’s trading session. This is likely to help investors to gain an insight into the nation’s economic growth for the third quarter and ascertain whether the strong pace of activity in the construction sector continues to keep Britain’s economic growth supported during the second half of 2014. Meanwhile, the BoE policy meeting scheduled on Thursday is expected to be a low key affair as markets expect policymakers to adopt a wait and watch approach amid mixed economic data recently.
US Dollar – US Markets
The US Dollar slipped against its major peers during the course of yesterday’s trading session, as investors’ preferred to book profits following the recent rally in the US Dollar. Meanwhile, the greenback continued to trade close to its overnight lows against the majors in today’s trading session. The only important release on the domestic economic calendar is US consumer credit data due later today which is anticipated to show that demand for new credit slowed for August.
Besides, markets will keep a tab on speeches from various US Fed officials in the latter half of today’s trading session, especially after last week’s encouraging jobs report bolstered hopes that the slack in the US labour market is reducing steadily. With the US Fed expected to end its bond buying programme this month, today’s comments might help investors to get hints on the timing of an interest rate rise in the world’s largest economy. Additionally, with no crucial macro triggers scheduled in the US this week, the minutes of the US Fed’s latest policy meeting will attract considerable market attention tomorrow.
Euro – European Markets
The Euro rebounded against the US Dollar yesterday and the pair is trading well above the 1.26 mark in today’s trading session. However, economic releases from the Euro zone continued to display signs of weakness in the region’s economy. A report released earlier today showed that industrial output in Germany declined more than expected for August. This did not come as a surprise, especially after the nation’s factory orders posted a more than anticipated decline yesterday. With the latest German PMI numbers confirming a contraction in the manufacturing activity, fears of Europe’s largest economy sliding into a recession for the third quarter seems legitimate.
The Sentix survey released yesterday also showed that confidence among investors remained subdued for October, reaffirming belief that economic activity in the common currency bloc is slowing. In the midst of weak macro data, it remains to be seen if ECB policymakers administer fresh policy measures to boost the region’s economy.
Other Currencies – Highlights
The Japanese Yen gained ground against the greenback in today’s trading session. The Bank of Japan, in its monetary policy meeting held earlier today, kept its key interest rate unchanged, in line with market expectations and maintained its pledge to increase the monetary base at an annual pace of about JPY 60-70 trillion. However, the central bank has revised down its assessment on factory output, indicating that the April sales tax hike has left a deeper dent in the nation’s economy. Additionally, Sayuri Shirai, a BoJ board member, expressed disagreement with the central bank’s perspective that inflation is moving closer to the 2% target. Another official, Takahide Kiuchi, suggested that the BoJ should lower its inflation target. This has stoked concerns among investors that subdued domestic spending conditions might cause the central bank to keep its loose monetary policy unchanged for a prolonged period.
With the BoJ’s monthly economic survey scheduled tomorrow along with the minutes of the US Fed’s latest policy meeting, the US Dollar-Japanese Yen is expected to witness some volatility.
Sterling Rises Sharply on Renewed Hopes of the UK Leaving With a Deal
Dollar Rises Modestly on FOMC Minutes
Sterling Rises on Hopes of EU Softening Tone on Backstop