UK November Factory Growth Slows Down
Factory growth in the UK for November eased from an unexpected surge in manufacturing activity in the previous month, according to a Markit survey report released just now. In other important news, the Bank of England (BoE) earlier today assured that Britain’s banking system was strong enough to support the economy in a severe global stress scenario.
In Europe, the final survey results indicated that Euro zone manufacturing sector extended a tepid recovery in November as the European Central Bank (ECB) prepares to unleash further stimulus measures at its policy meeting this week to ensure that momentum continues to build. Another set of manufacturing activity growth data is scheduled in the US later today.
Pound Sterling – UK Markets
UK economic news were light yesterday, with the official BoE figures for October indicating that consumer borrowing continued to rise strongly for October, while the number of approvals for house purchases rose slightly below market estimates for the same month. The surge in consumer lending is likely to put pressure on the UK central bank to impose restrictions on banks to hold back the growth of consumer credit. The BoE earlier today published the outcome of its annual stress tests for UK’s biggest lenders, which was to determine whether banks were strong enough to withstand a crisis scenario and prolonged deflation in the UK. Though the banks cleared the test, it is possible that they could face a bigger hurdle next year.
On the macroeconomic front, the just released report revealed that the UK manufacturing activity growth eased more than expected last month, falling back from a surprisingly sharp spike in PMI for October. However, the factory activity PMI reading is at levels suggesting strong growth in the sector. The Pound has trimmed part of its gains against the US Dollar, following the release of economic data.
US Dollar – US Markets
The greenback is trading broadly lower across the board this morning, however, the US Dollar has managed to hold on to some gains against the Euro amid heightened prospects of a US interest rate rise before the end of this year. Also, recovery in the Euro – US Dollar currency pair is lackluster as the ECB decision looms later this week.
In a busy day for economic releases today, investors will today try to gauge the health of the US manufacturing sector via the ISM and Markit survey report. For most of this year, markets have witnessed sluggish growth in the US manufacturing sector but some of the latest regional Fed manufacturing indices have posted varying degrees of improvement in the previous month. Yesterday’s numbers by the Dallas Fed had signalled some easing in the manufacturing activity downtrend for November. The ISM factory activity reading today is anticipated to slightly tick higher for November, but the Markit’s revised PMI print is predicted to match the flash reading which had unexpectedly fallen to a two year low.
Euro – European Markets
This morning, the common currency has managed to recover from multi-month lows reached against the US Dollar yesterday, although the gains appear to be capped as the currency pair failed to clinch the 1.06 mark earlier today. The uncertainty surrounding the ECB’s monetary policy action this Thursday has kept the Euro under pressure against its key peers, though the magnitude of decline has dropped off late.
There is a long list of economic releases in the European docket today which includes an array of manufacturing PMI data in the Euro zone and its peripheries. The final data print which came out earlier today confirmed that growth in the Euro zone’s manufacturing sector had a modest expansion in November and factory growth in Germany rose above earlier estimates. Also, first look at the Spain’s manufacturing sector for November indicated that factory activity improved for the first time since June. Separately, German jobless rate dropped to an all-time low in November. However, the positive figures are unlikely to influence the ECB’s decision ahead of Thursday’s crucial policy meeting.
Other Currencies – Highlights
Earlier today, the Swiss Franc trimmed part of its gains against the US Dollar after figures published today revealed that Switzerland’s retail sales unexpectedly contracted in November wiping off the marginal growth witnessed in the previous month. The disappointing retail sales update was followed up by a GDP reading published earlier which showed that the Swiss economy stagnated in the third quarter, missing market expectations of modest growth. Growth in the Switzerland’s economy was held back as the nation’s exports continued to be battered by a strong Swiss currency. The Swiss Department of Economic Affairs stated that positive contributions to GDP growth came from healthcare, insurance services and manufacturing, while weak performance of the energy, construction and financial sector hurt the economy. However, broad based weakness in the greenback helped the Swiss Franc today despite downbeat domestic economic releases.
In the session ahead, the ISM manufacturing PMI in the US will attract some market attention and could influence trading in the US Dollar – Swiss Franc currency pair.