US Durable Goods Orders in Focus
With a light economic calendar in the UK today, Sterling is anticipated to take direction from global cues. However, with the minutes of the latest BoE policy meeting being slightly dovish and amid rising prospects of a delay in the timing of an interest rate rise in the UK, overall market sentiment towards the Pound is expected to remain subdued.
Across the Atlantic, market participants will look for hints on the future course of monetary policy in the US as the Fed begins its two-day policy meeting later today. Besides, US durable goods orders and consumer confidence data due later today will attract market attention, especially considering yesterday’s weak Markit services PMI data.
Pound Sterling – UK Markets
In the absence of major macro triggers in the UK yesterday, Sterling remained supported above the 1.61 mark against the greenback. Gains in the Pound-US Dollar were extended after data released in the US showed that the pace of expansion in services sector activity slowed more than expected for October. However, dovish comments by the BoE Deputy Governor, Minouche Shafik, capped gains in Sterling. She suggested that the central bank should wait for more signs of price pressure to build up in the economy before considering an interest rate rise in Britain. Additionally, she raised concerns about the considerable slack in the UK labour market.
In tomorrow’s trading session, markets will keep an eye on UK consumer credit data which is anticipated to show a drop for September and heighten worries about a deteriorating domestic risk appetite. Additionally, another report is expected to show that the number of mortgage approvals in the UK dropped for a fourth straight month due to tough mortgage lending rules introduced by the central bank.
US Dollar – US Markets
In today’s trading session, a slew of US economic data is likely to keep market participants on their toes. Durable goods orders are expected to rise moderately for September, after reporting a sharp drop for the previous month. However, the trend of durable goods orders during the previous two months has been distorted due to a one time gain in aircraft orders. Additionally, the Conference Board’s report is anticipated to show an improvement in US consumer morale for October after an unexpected drop reported during the preceding month. However, market focus is likely to remain on this week’s US FOMC meeting where the central bank is expected to announce an end to its bond buying programme this month.
The greenback lost ground against the majors in yesterday’s trading following the release of downbeat Markit US services PMI data for October. The report showed that services sector activity in the US expanded at the slowest in last six months. In the light of weak PMI readings lately, market participants fear prospects of a slowdown in the private sector during the fourth quarter.
Euro – European Markets
The Euro lost ground against the greenback in early trading session yesterday following the release of weak Ifo survey in Germany. Data showed that morale among firms in Germany deteriorated for a sixth straight month, as the threat of recession continued to keep businesses worried. The report further revealed that economic growth in Germany is anticipated to remain flat during the fourth quarter of 2014, heightening fears of deeper macro troubles in the nation. Meanwhile, the Euro pared its losses in the latter half of yesterday’s trading session after data released in the US indicated that the pace of services sector activity slowed during the initial phase of the fourth quarter.
In the absence of major domestic economic releases, the common currency is likely to take direction from durable goods orders and consumer confidence data in the US later today. Going forward, this week’s preliminary data in Germany is anticipated to show an acceleration in consumer price inflation for October. However, a downside surprise in German inflation data is likely to heighten fears of a deflation in the common currency bloc.
Other Currencies – Highlights
Data released overnight showed that retail sales in Japan climbed for a third straight month during September and registered its strongest rise in the past six months, offering evidence that domestic morale improved last month. This is an encouraging sign that the nation might be ready for the next sales tax hike, especially after the Bank of Japan Governor, Haruhiko Kuroda, urged the government recently to go ahead with the next sales tax hike. However, the Japanese Yen showed little reaction to the upbeat Japanese retail sales report.
Going forward, the Japanese Yen is likely to take direction from today’s domestic industrial production data accompanied by macro releases in the US. Additionally, this week’s US Fed policy meeting and consumer price inflation data in Japan will be crucial for the US Dollar-Japanese Yen pair.