Headlines
• UK manufacturing PMI on tap –
Two-year low expected.
• GBP/EUR hits two-month high –
Eurozone CPI rises to 0.0%.
• GBP/USD rises 50 pips –
US consumer confidence down.
• Japan hints at more stimulus –
Chinese PMI shrinks.
Sterling
After a subdued few months of UK manufacturing data analysts are not overly optimistic about the latest factory output report. It’s been quipped that George Osborne’s fabled ‘march of the makers’ has actually turned out to be a stroll of the shoppers, due to Britain’s current reliance on consumer spending to drive growth in the absence of decent manufacturing growth. This morning’s PMI report is expected to show that output slowed to its lowest level for two years during October, which could compromise demand for the Pound if it is seen to reduce the possibility of a rate hike from the Bank of England.
Euro
The Pound to Euro exchange rate rallied by around half a cent to strike a 70-day high on Friday afternoon as European Central Bank easing bets increased despite a slender rise in Eurozone inflation.
The currency bloc’s latest consumer price index report showed that Europe emerged from disinflationary territory in October but another -8% drop in energy prices meant that price pressures stagnated at 0.0% over the month. A separate report showed that unemployment in the 19-nation bloc fell from 10.9% to 10.8% in September but the two-and-a-half-year low print was not enough to lift sentiment towards the single currency.
Markets have taken to selling the Euro ahead of December’s ECB meeting, which is anticipated to see President Mario Draghi loosen monetary policy by either prolonging the bank’s €60 billion per month asset purchasing scheme or by making further cuts to the deposit rate, which is already sitting in the red at -0.20%.
US Dollar
Sterling appreciated by over a cent on Friday as demand for the ‘Greenback’ remained strained following Thursday’s soft US GDP report.
The Pound hit a 10-day high during the afternoon as traders reacted to a set of underwhelming US ecostats, which did little to convince markets that economic activity is on path to bounce back over the next few months. An index of personal income slowed from 0.4% to 0.1% whilst personal spending cooled by the same amount and consumer confidence dipped from 92.1 to 90.0.
Despite the recent downturn in US data releases the US Dollar is likely to garner support over the next month as Federal Reserve rate hike bets intensify ahead of December’s central bank meeting.
Canadian Dollar
The Pound strengthened by around a cent on Friday in reaction to a weaker-than-anticipated Canadian GDP report. Markets were primed for an annualised growth print of 1.0% but a deceleration of economic activity in August drove output down to 0.9%, which led to a temporary dip in demand for the ‘Loonie’. However, the Canadian Dollar clawed back most of its losses before the end of the North American session.
Australian Dollar
On Friday the Bank of Japan hinted that it may bolster its expansive quantitative easing scheme in the near future, which could theoretically give the Australian Dollar a boost by increasing liquidity in the Asia-Pacific region and by enhancing cross border trade flows between the two nations. However, on this occasion the dovish statement had only a minimal bearing on investor sentiment and GBP/AUD remained fairly flat throughout the day.
New Zealand Dollar
Despite the potentially risk boosting prospect of further monetary easing in Japan – not to mention New Zealand’s impressive Rugby World Cup victory – the New Zealand Dollar got off to a bad start to the week earlier this morning. Demand for the Antipodean currency was hampered by a contractionary Chinese Manufacturing PMI score of 49.8, which undershot the median market consensus of 50.0 and boded ill for economic trade in the region.
Data Released Today
09:30 GBP Markit UK PMI Manufacturing s.a. (OCT) Medium 51.3
15:00 USD ISM Manufacturing (OCT) High 50