Headlines
• Pound recoups losses –
Manufacturing Production data ahead
• IMF Upbeat on UK Growth Prospects –
Cuts global outlook
• German Industrial Production Falters –
Euro declines
• Fed’s Williams Still Sees 2015 Rate Hike –
USD struggling on poor data
Sterling
Despite a lack of market-moving UK data on Tuesday the Pound was still able to claw back some of the losses inspired by Monday’s sub-par Services PMI.
Support for Sterling came later in the day as the International Monetary Fund (IMF) published its global growth forecasts. While the institution cut the worldwide outlook, citing the impact of slowing growth in emerging markets on inflationary pressures, it’s assessment of the UK’s prospects was fairly upbeat.
The IMF revised its predictions for UK expansion in 2015 to 2.5%, a slight improvement on the number quoted in July and an estimate which puts Britain as one of the fastest growing advanced economies.
The Pound briefly edged above the 1.36 level against the Euro and was trending above 1.52 against the US Dollar ahead of the publication of the UK’s Industrial/Manufacturing Production figures.
If the data improves on the 0.3% month-on-month increase forecast by economists Sterling could trend higher as the day progresses.
Euro
Another mixed bag of ecostats for the Eurozone kept the Euro trending in a narrow range against its major peers on Tuesday. An unexpected slide in German Factory Orders was followed by a higher Construction PMI and lower Retail PMI for the currency bloc’s largest economy.
The Eurozone’s own Retail PMI improved on the previous figure of 51.4 by climbing to 51.9.
However, the common currency came under pressure this morning as German Industrial Production bombed. Output fell by -1.2% on the month in August rather than rising the 0.2% expected, resulting in an annual result of 2.3% – shy of the 3.3% predicted.
With negative reports from the currency bloc supporting the case in favour of the European Central Bank (ECB) expanding stimulus, the common currency may remain under pressure ahead of the publication of the ECB’s meeting minutes tomorrow.
US Dollar
With Friday’s dire Non-Farm Payrolls report crushing expectations for an October interest rate revision from the Federal Reserve, the US Dollar had a mixed start to the week.
Monday’s below-forecast US ISM Non-Manufacturing gauge weighed on the ‘Greenback’ and the currency failed to rally against its major rivals on Tuesday in spite of hawkish commentary from Fed official John Williams. The President of the Federal Reserve Bank of San Francisco asserted that he still envisages borrowing costs being increased this year in spite of the recent drop-off in employment.
He stated; ‘Things are looking up, and if they stay on track, I see this as the year we start the process of monetary policy normalisation.’
Today’s US reports, MBA Mortgage Applications and Consumer Credit figures, might not have much of an impact on US Dollar trading, but volatility is likely to be inspired tomorrow when the minutes from the last Federal Open Market Committee (FOMC) policy gathering are published.
Although the minutes were compiled before the horrendous NFP report was published, they may still offer an insight into the Fed’s intentions regarding raising borrowing costs.
The Canadian Dollar enjoyed an uptrend on Tuesday, holding above the 76 cent level against the US Dollar, as the price of crude oil climbed 5%. The ‘Loonie’ largely held previous gains against the Pound in spite of Canada’s Ivey Purchasing Managers Index moving closer to the 50 mark separating growth from contraction, with the index sliding from 58.0 in August to 53.7 in September.
Today’s Canadian Building Permits report may bolster the Canadian Dollar if it confirms or exceeds the 0.3% month-on-month increase forecast.
Although the International Monetary Fund (IMF) trimmed its forecasts for Australian growth in both 2015 and 2016, the Australian Dollar proved resilient and retained the upper hand against both the Pound and US Dollar during the local session.
With the Trans-Pacific Partnership trade agreement, neutral Reserve Bank of Australia (RBA) policy statement and negatively revised Federal Reserve interest rate hike expectations all lending the ‘Aussie’ support, the currency was little effected by a decline in the AiG Performance of Construction Index. The index slid from 53.8 to 51.9 in September, a similar drop to that seen in Australia’s Performance of Services measure.
New Zealand Dollar
As commodity-driven assets remained trending higher in the face of revised Fed rate hike predictions, the ‘Kiwi’ put on a strong showing against peers like the Pound and US Dollar.
An uptick in the price of dairy, New Zealand’s core commodity, gave the ‘Kiwi’ an additional boost. Dairy prices climbed for the fourth consecutive Global Dairy Trade auction, taking the commodity 60% higher than it was towards the close of August.
Data Released Today
09:30 GBP Industrial Production (YoY) (AUG) – Medium
09:30 GBP Manufacturing Production (YoY) (AUG) – Medium
13:30 CAD Building Permits (MoM) (AUG) – Medium
15:00 GBP NIESR GDP Estimate (SEP) – Medium
20:00 USD Consumer Credit (AUG) – Medium