UK Manufacturing Production Improves
Official UK data for November, released this morning, showed that domestic manufacturing production improved for the month and the trade deficit narrowed. However, the Pound has shown little reaction to the data as sentiment among investors remains broadly subdued due to the recent downbeat manufacturing and services PMI surveys in the UK. Separately, the BoE kept its current policy stance unchanged in its policy meeting yesterday. In the Euro zone, today’s German industrial production and trade data offered little relief to investors after yesterday’s soft macro updates strengthened prospects of further stimulus measures in the region.
Across the Atlantic, today’s official US labour market update will attract considerable attention, especially considering the importance of the labour market to the Fed’s policy stance going forward.
Pound Sterling – UK Markets
Data just out revealed that industrial and manufacturing production in the UK improved for November, in line with the upbeat Markit report for the month which showed that domestic manufacturing activity accelerated. However, with the latest PMI gauges indicating that overall activity in the UK is slowing, investors are likely to remain concerned about the headwinds that Britain’s economy faces from a slowdown in Europe. Separately, another survey showed that UK’s trade deficit narrowed for November, helped by a lower oil import bill. Meanwhile, Sterling has shown little reaction to today’s data as traders remain focused on the NIESR’s GDP estimate scheduled later today to gauge Britain’s economic growth for the last quarter of 2014.
The Pound gained ground against the Euro yesterday amid speculation that the ECB will implement quantitative easing measures in the Euro zone going forward. Separately, the BoE in its policy meeting yesterday kept its interest rate unchanged and maintained its asset purchase facility at £375 billion.
US Dollar – US Markets
The greenback is trading in a tight range against the Pound this morning ahead of the crucial labour market data in the US which is expected to show that the unemployment rate for December dropped to 5.7%, its lowest rate since June 2008. Additionally, with this week’s ADP report showing that job growth in the US private sector remained robust, investors will eye today’s nonfarm payrolls reading to ascertain if the number of job additions in the economy remained above 200k for a fourth straight month. However, prospects of a negative surprise in today’s jobs update cannot be ruled out, especially considering the impact of the December winter and the recent downbeat ISM surveys. Furthermore, traders will scrutinise today’s print to gauge if wage growth gained pace in the US last month, particularly after the latest FOMC minutes revealed that policymakers will look for signs of upward pressure in the nation’s inflation before raising interest rates.
Yesterday, the US Dollar failed to retain its early session gains against the majors after the weekly jobless claimants data surprised traders on the downside.
Euro – European Markets
The Euro briefly fell below the 1.18 mark against the greenback this morning following the release of downbeat German data earlier today. The industrial production report showed an unexpected drop in Germany’s seasonally adjusted manufacturing output for November. This morning’s weak industrial production data, coupled with yesterday’s soft factory orders numbers, indicate that demand among domestic manufacturers deteriorated and has stoked investor concerns about the macro environment in Europe’s largest economy. Additionally, another report revealed that German trade surplus narrowed surprisingly for November.
Yesterday, the Euro traded weaker against the Pound. The ECB Chief publicised the letter he had written to European Parliament lawmakers which stated that the central bank stands ready to implement quantitative easing measures. Additionally, soft Euro bloc’s producer price inflation data and German factory orders numbers strengthened speculation that the ECB will unleash a sovereign bond purchase programme in its upcoming policy meeting.
Other Currencies – Highlights
The Swiss Franc lost ground against the greenback earlier today following the release of jobs data in Switzerland which showed that the unemployment rate for December unexpectedly remained unchanged. Market participants were anticipating the jobless rate in Switzerland to decline. However, the Swiss Franc pared its losses later in the session. Separately, another report revealed that consumer price inflation in Switzerland eased more than expected in December, heightening concerns of deflationary headwinds from Europe.
With little on the domestic macroeconomic front today, traders will keep a tab on the Euro-Swiss Franc pair which is trading close to the 1.20 mark, bolstering prospects of an intervention by the Swiss National Bank. Going forward, with the crucial labour market report in the US scheduled later today, the Swiss Franc is likely to witness some volatility against the greenback in the latter half of the trading session.