UK Construction Sector Contraction Weighs on Pound (GBP)
Although October’s UK construction PMI proved stronger than forecast the index remained well below the 50 mark separating growth from contraction, putting GBP under pressure.
The headline index clocked in at 44.2 and accompanying commentary indicated that Brexit-based uncertainty is set to keep the sector under pressure for the remainder of the year.
The Pound could extend losses today if the UK’s services PMI also comes in below 50. Economists have forecast a reading of 49.7 for October, a slight improvement on September’s 49.5.
Signs of German Manufacturing Slowdown Drag on Euro (EUR)
An upward revision to October’s German manufacturing PMI failed to ease anxiety over the outlook of the Eurozone’s powerhouse economy. The reading of 42.1 still signalled a weak month for the sector, driven in part by a sharp decline in employment levels. This weakness supported speculation that Germany entered a recession in the third quarter, casting a dark cloud over the outlook of the wider Eurozone and denting the Euro.
An uptick in September’s Eurozone producer price index figures could encourage the single currency to recover some of its lost ground, however.
US Dollar (USD) Bounces Back on Signs of Manufacturing Resilience
Despite a sharp monthly decline in factory orders the US Dollar found renewed support on Monday, shaking off anxiety over the health of the US manufacturing sector.
Investors took encouragement from a surprisingly solid improvement in October’s ISM New York index, which strengthened from 42.8 to 47.7. This suggests that manufacturing activity recovered slightly at the start of the fourth quarter.
A narrowing of the US trade deficit could offer USD exchange rates an additional boost later today.
Oil Price Rally Fuels Canadian Dollar (CAD) Gains
Oil prices rallied at the start of the week as hopes of an imminent phase one US-China trade agreement picked up once again. With both US and Chinese officials offering positive signals, risk appetite improved. This helped drive Brent crude to its best level in more than a month, lifting the commodity-correlated Canadian Dollar in turn.
CAD exchange rates may gain further ground on the back of a narrowed trade deficit, even though forecasts point towards a lower level of exports in September.
Australian Dollar (AUD) Bolstered by RBA Decision
The Australian Dollar rallied overnight as the Reserve Bank of Australia (RBA) opted to leave interest rates unchanged at its latest policy gathering.
In explaining their decision, RBA Governor Philip Lowe stated that rebounding house prices were indicative of a strengthening economy.
New Zealand Dollar Supported by Improved Risk Appetite
The New Zealand Dollar strengthened against the Pound, Euro and US Dollar during the Australasian session as risk appetite improved.
New Zealand’s commodity price index also came in at 1.2% in October.