The Markit PMI report has today revealed that the health of the UK manufacturing sector unexpectedly improved during the initial phase of the fourth quarter of 2014. This has heightened speculation of an earlier than expected rise in interest rates, thereby supporting the Pound against the majors in today’s trading session. Against this backdrop, market participants will keep a tab on tomorrow’s construction PMI and services activity data due later this week to better assess the nation’s economic health.

Across the Atlantic, the ISM manufacturing PMI reading due later today will attract considerable market attention and is anticipated to show a marginal deterioration in the nation’s manufacturing sector activity for October.

Pound Sterling – UK Markets

Data just out has indicated that manufacturing PMI in the UK surprisingly advanced for October. With the pace of activity showing an improvement in the initial phase of the fourth quarter of 2014, market sentiment has received a boost as it has provided more ammunition to the hawks in the BoE rate-setting committee in their debate to raise interest rates soon. As a result, Sterling has moved higher against the majors this morning and is trading above the 1.60 mark against the US Dollar. Moving ahead, this week’s UK services PMI reading will be eyed to gain a better insight into the nation’s overall macroeconomic health, especially considering that Britain’s economy is dominated by the services sector. However, the BoE policy meeting is likely to be the most notable macro event in the UK this week for further direction to risk appetite.

The Pound was volatile against the greenback on Friday. The GfK report released on Friday showed that consumer confidence in the UK deteriorated for October, as households remained uncertain about the nation’s economic outlook amid muted wage growth.

US Dollar – US Markets

The greenback is trading in a tight range against the common currency this morning. Market participants will keep a tab on today’s ISM manufacturing PMI data in the US which is anticipated to show a slowdown in the pace of manufacturing activity growth for October. However, a further downside surprise in today’s survey cannot be ruled out, especially after the recent Markit flash manufacturing PMI report for October showed a more than expected drop due to sluggish growth in new industrial orders. Separately, another report is expected to show a rebound in US construction spending for September. The report will attract considerable market interest as it is likely to provide investors with an insight into the prospects of a revision to the nation’s GDP reading for the third quarter.

In Friday’s trading session, the US Dollar gained ground against the common currency. The final Reuters/Michigan survey released in the US surprised market participants with an uptick in consumer morale for October. Meanwhile, traders will eye this week’s official US employment report to verify if the labour market maintained momentum last month.

Euro – European Markets

In today’s early trading session, the Euro slipped below the 1.25 mark against the US Dollar for the first time in more than two years. However, the single currency managed to recoup some of its losses later in the session. The common currency is likely to remain under pressure against the majors amid uncertainty surrounding the ECB’s monetary policy meeting later this week. Although a lack of consensus among the central bank’s policymakers might prevent the ECB from resorting to sovereign debt purchases any time soon, some media reports have recently indicated that the central bank might consider adding other private sector assets to its current asset buying programme. Meanwhile, the latest PMI data from the Euro zone showed a downward revision to German manufacturing activity for October. For the day ahead, economic releases from the US will be eyed for further direction.

In Friday’s trading session, the Euro lost ground against the Pound after data released in the Euro zone showed an unexpected drop in annual core consumer price inflation for October.

Other Currencies – Highlights

The Swiss Franc is trading in a tight range against the greenback today. The SVME manufacturing PMI survey for October released earlier today showed that the pace of manufacturing activity increased to its highest pace in the last six months. The survey revealed that order books of firms expanded and the pace of production increased last month. Additionally, the survey showed that the hiring pace in the nation’s manufacturing sector gained further momentum, improving investors’ sentiment towards the Swiss Franc.

With little on the domestic macroeconomic front, the Swiss Franc is anticipated to take direction from today’s ISM manufacturing PMI data in the US. Moving forward, the Swiss consumer price inflation report will be closely watched and is anticipated to show a drop for October. Market participants will also keep a tab on this week’s ECB policy meeting where the central bank might provide hints about further easing measures in the Euro bloc.