US Fed to Keep Rates Unchanged as Presidential Election Looms
Today is a very busy day for global economy watchers. While the Euro zone witnessed the release of some high-impact manufacturing figures, the US Federal Reserve (Fed) will end its 2-day monetary policy meeting today. The final reading of the Euro region’s manufacturing purchasing managers’ index (PMI) unexpectedly rose, while that of Germany reached an almost 3-year high in October.
The US Fed is widely expected to leave the benchmark interest rate steady at today’s meeting. Also, the Fed Chairwoman, Janet Yellen, will not be holding a follow-up press conference today. All eyes are on the central bank’s accompanying statement, to see if the Fed will signal that an interest rate rise is on tap for December. Separately, in Britain, construction PMI reading exceeded market expectations in October.
Pound Sterling – UK Markets
The Pound is trading mixed against its major peers this morning. The just released data showed that UK’s construction PMI surprisingly rose to a 7-month high in October from September, as housebuilding rose. Separately, a report disclosed that prices in British shops fell at a slower pace during the same month. Further, data by UK’s mortgage lender Nationwide showed that the nation’s house prices registered a flat reading for October, after rising in each of the previous 15 months. Looking ahead, the Bank of England (BoE) will deliver its latest monetary policy decision tomorrow.
Yesterday, Sterling briefly climbed against its major counterparts, after the BoE Chief, Mark Carney, announced that he would retain his post as the central bank Governor for an additional year to the end of June 2019, to help secure an orderly transition of Britain out of the European Union. This reaction of the Pound confirmed that markets see his continued tenure as a positive for the UK economy. However, the Carney boost to the Pound evaporated after data showed that UK’s manufacturing sector lost steam in October.
US Dollar – US Markets
The greenback is trading lower against the Pound and the common currency this morning. Later today, market participants will keenly watch the US Fed’s interest rate decision along with ADP employment change, ISM New York index and MBA mortgage applications data, for further cues in the US Dollar. The US Fed is likely to keep the benchmark interest rate steady at today’s monetary policy meeting.
The US Dollar weakened against most of its major peers yesterday, amid increasing uncertainty ahead of upcoming US Presidential elections, after a media poll showed that the Republican US presidential candidate Donald Trump could be closing the gap with his Democratic rival Hillary Clinton. Data indicated that the US ISM manufacturing activity improved more than anticipated in October, fuelling optimism over the strength of the nation’s economy and increasing expectations that the US Fed would raise interest rate by the end of this year. In other economic news, the final Markit manufacturing PMI slightly advanced in October. Meanwhile, construction spending in the US unexpectedly fell on a monthly basis in September.
Euro – European Markets
The shared currency is trading higher against the US Dollar and the Pound this morning, following the release of robust manufacturing PMI data from the Euro zone. The final reading of the Euro region’s manufacturing PMI surprisingly advanced in October. Meanwhile, the Euro zone’s growth engine is likely to receive a thrust from the German manufacturing sector which notched a 33-month high growth in October. However, it came in slightly below the flash reading. Further, French manufacturing activity rose and that of Italy fell in October, compared to the preliminary reading. Spain continued to surprise on the economic release front as the nation’s manufacturing PMI rose at its fastest pace since April, buoyed by an increase in new orders. Separately, the Spanish Parliament granted Mariano Rajoy a second term as Prime Minister.
In other economic news, Germany’s seasonally adjusted unemployment rate unexpectedly fell to 6.0% in October, as the number of jobless people in the nation significantly dropped during the period.
Other Currencies – Highlights
The Australian Dollar is trading on a weaker footing against the greenback this morning, after the release of downbeat building approvals from Australia. The nation’s building permits plummeted in September, dropping for the fourth time in the past five months.
During the previous session, the Australian dollar enjoyed a rally against its US counterpart, following the Reserve Bank of Australia’s (RBA) decision to hold the cash rate steady at 1.50%. Adding to signs that the RBA board is comfortable with monetary policy right now, Governor, Philip Lowe, reiterated that the bank’s forecasts for gross domestic product growth and inflation were little changed from those of three months ago. Moreover, upbeat Chinese economic data provided further impetus to the Australian Dollar. China's official manufacturing PMI, the private Caixin manufacturing PMI and the nation’s non-manufacturing PMI surpassed market expectations in October. Also, a separate report showed that Australia’s manufacturing PMI swung into expansion in October, amid an increase in sales, new orders and exports.