Sterling investors largely shrugged off the weak UK public sector net borrowing data as the Pound showed little reaction against the majors this morning. Market attention has now shifted on to the minutes of the BoE’s latest policy meeting scheduled tomorrow for further direction. Traders are anticipated to scrutinise the minutes to gain an insight into the timing of an interest rate rise in the UK.
Across the Atlantic, the only notable macro trigger today is the existing home sales report which is expected to show encouraging sales for September. Meanwhile, in the absence of any important economic data in Europe, the common currency is likely to remain supported against the majors following better than anticipated Chinese GDP data for the third quarter.
Pound Sterling – UK Markets
Data just released revealed that the UK’s public sector borrowed more than expected for September. Today’s data has further validated the recent concerns highlighted by the UK Chancellor, George Osborne, about mounting government debt. However, the Pound has shown little reaction to today’s economic data and continued to trade in a tight range against the greenback this morning. Sterling is anticipated to remain supported today, especially after China’s GDP data for the third quarter released earlier today surpassed market estimates.
Traders will keep a tab on the minutes of the Bank of England’s latest policy meeting scheduled tomorrow. The minutes is anticipated to show that two policymakers continued to vote in favour of an immediate interest rate rise in the UK. However, with broadly mixed domestic economic data lately and amid prospects of the weakness in Euro zone adversely impacting Britain’s growth, market participants will closely scrutinise the minutes to gauge whether any other factor played on the minds of the policymakers in keeping their policy stance unchanged at the last meeting.
US Dollar – US Markets
In the absence of important economic releases in the U.S., the greenback lost ground against the majors in yesterday’s trading session. There was uncertainty among market participants not only on the probable timing of an interest rate rise, but also on whether the US Fed plans to end its bond purchase programme later this month. The prospects of an extended stimulus period in the US cannot be ruled out, especially after some policymakers recently suggested that more stimulus might protect the US economy from threats posed by a slowdown in the Euro zone. Meanwhile, investors will keep an eye on tomorrow’s consumer price inflation report in the US, particularly as low inflation remained a cause of concern among most Fed officials lately. Although markets expect an easing trend in inflation, any downside surprise is likely to heighten fears about a slowdown in the US economy.
The existing home sales report in the US is the only key macro release scheduled today. With the recent US housing data remaining mixed, today’s data will be closely watched to ascertain if the demand for buying homes trends higher for September.
Euro – European Markets
The Euro gained ground against the greenback today and crossed the 1.28 mark. Risk appetite among investors received a boost earlier today after China reported better than expected GDP data for the third quarter of 2014. However, with little on the domestic macroeconomic calendar today, the Euro is likely to take direction from global cues.
Going forward, market participants will keep a tab on this week’s preliminary German manufacturing PMI reading for October, especially after the nation’s manufacturing sector slipped into the contraction phase last month. Although the German manufacturing sector is anticipated to contract further, a more than expected drop is likely to raise concerns about deeper macro troubles in the region’s largest economy. Furthermore, the German GfK survey scheduled later this week is expected to show another deterioration in consumer morale for November. With most of the economic data in Germany expected to show no signs of improvement during the fourth quarter of 2014, market speculation is rife that Europe’s largest economy might be slipping into a more prolonged period of recession.
Other Currencies – Highlights
The Swiss Franc gained ground against the greenback, with the US Dollar-Swiss Franc pair trading close to the 0.94 mark. Data released earlier today showed that trade surplus in Switzerland widened less than expected for September. However, this might not have come as a surprise to investors, especially considering the weak macroeconomic scenario in the Euro zone, Switzerland’s largest trading partner.
With no other crucial domestic economic releases scheduled this week, the consumer price inflation report and the preliminary manufacturing PMI reading in the US will be some crucial events that would provide further direction to the US Dollar-Swiss Franc pair. In the forthcoming week, the UBS and KOF surveys in Switzerland will help market participants to gauge if macro troubles in the common currency bloc is affecting the nation.
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