Will US Fed speeches give insight on timing of an interest rate rise?
The first day of this week brings an array of new survey data from across the globe. The Eurozone and Germany got a good head start, with both manufacturing and services purchasing managers indices (PMI) for October coming in better than expected.
In the UK, the Confederation of British Industry’s (CBI) industrial trends orders survey is the only headline-grabbing economic release. Across the Atlantic, the immediate focus remains on speeches from Federal Reserve (Fed) officials, as market participants await hints to justify their call for a December rate rise as appropriate. Additionally, an update on the broad US macro trend will be made available via the nation’s Manufacturing PMI and Chicago Fed National Activity Index.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the Euro this morning. The British economic calendar is light today with just the CBI industrial trends survey orders data up for release – it’s expected to register a slight improvement for October.
Looking ahead, the most significant economic release for Sterling this week will be the preliminary reading of UK’s third quarter GDP data which is expected to decline in comparison to its second quarter reading. The figure will be closely watched as market participants speculate about the Bank of England’s (BoE) next move. Another key event will be BoE Governor Mark Carney’s speech, where he is expected to testify about the economic consequences following the shock Brexit vote. Britain’s BBA mortgage approvals, nationwide housing price data and consumer confidence index will also keep investors busy this week.
US Dollar – US Markets
The US Dollar strengthened against most of its major counterparts on Friday, amid rising expectations that the US Fed will increase interest rate before the end of the year. Moreover, the San Francisco Fed President, John Williams, stated that the US economy is pretty much at full employment and that the economy is heading in the right direction. He added that he would support the case for an interest rate rise in 2016.
Today, market participants will be watching the US flash Markit manufacturing PMI and the Chicago Fed national activity index, scheduled to be released later in the day, plus speeches from 4 of the Fed’s key policy makers. Will these speeches give any insights on the timing of an interest rate rise by the US central bank? Moving ahead, US gross domestic product and durable goods orders data are both slated later in the week.
Euro – European Markets
The shared currency is trading higher against its key counterparts today, after data released earlier during the session showed that the preliminary reading of the Eurozone’s manufacturing and services PMI advanced above expectations for October. Germany, the Euro region’s largest economy, also brought in some good news today - private sector growth blew past expectations during October. Separately, France delivered mixed results this morning. While French manufacturing growth hit a 10-month high level for October, the services PMI slipped to a 3-month low. In other economic news, Italy’s trade surplus narrowed in September.
On Friday, the Euro plummeted to a 7-month low against the US Dollar, and investor sentiment didn’t improve after the European Central Bank President, Mario Draghi, stated that the central bank had not discussed tapering at its recent monetary policy meeting, in contrast to recent rumours. On the data front, confidence among Eurozone consumers slightly improved for October.
Other Currencies – Highlights
The Japanese Yen is trading on a weaker footing against the greenback this morning. Data released earlier in the session showed that a private gauge of Japan’s manufacturing activity advanced in October, registering its highest reading since July 2015. This was mainly led by an increase in new orders suggesting that the worst of the manufacturing downturn has passed. Separately, Japan’s final leading index, which denotes future economic activity, declined in August. Meanwhile, the final reading of the nation’s coincident index, which reflects current economic activity, remained steady. Investors await Japan’s national consumer price index and unemployment rate data for the month of September later this week.
Over the weekend, a report by Japan’s Ministry of Finance showed that the nation’s trade balance swung to a surplus in September, as exports fell less than expected. The latest set of incoming data will be closely scrutinised by the Bank of Japan at its monetary policy meeting next week, where it is set to issue new economic and inflation forecasts.