Manufacturing, construction and services data all in focus this week
A weekly currency market update from Carl Hasty, director of Smart Currency Business.
Sterling was relatively quiet on Friday, ending a relatively busy week. The Second Estimate Gross Domestic Product (GDP) figure was the main interest of the day; this came in as forecast at 0.7%.
With no data released yesterday due to the UK bank holiday, this morning’s focus will be on UK Manufacturing Purchasing Managers’ Index (PMI) data. The manufacturing sector has showed expansion month-on-month so far in 2015; the forecast figure of 51.9 indicates no buck in the trend, but a shock outcome could result in some early activity for sterling. On Wednesday, we have the Construction PMI data released which is expected to remain at a similar level to August. On Thursday we have the Services PMI data which is expected to show solid growth at 57.6.
A busy week ahead for the euro?
The euro erased gains against the US dollar while staying unmoved against sterling as those made on Friday morning were eradicated in the afternoon. The single currency came under broad selling pressure last week, after the European Central Bank (ECB) warned on Wednesday that the risk to its inflation has increased in recent times, and that it is prepared to expand its quantitative easing program if necessary.
This week, German retail sales data were released on the bank holiday in the UK yesterday, showing growth of 1.4%. The main release will be today’s unemployment data figures across the Eurozone; this is forecast to remain at 11.1% but if it comes out even slightly better than expected it could increase support for the single currency.
Manufacturing Purchasing Managers’ Index (PMI) data is also released for the Eurozone today, and on Thursday we will see the Non- Manufacturing PMI figures released.
Fridays jobs data the key focus for the week.
Positivity continued to surround the US dollar on Friday, as it strengthened thanks to the comments made by US Federal Reserve members that suggested interest rates could still be raised in the near future – in spite of the Chinese slowdown. Banks also upgraded their US growth figures for the third quarter of 2015, following the better-than-expected figure last week.
Last Friday’s data releases showed Personal Income growing in line with expectations, providing a key indication that the US economy is on track for a possible interest rate rise early next year. However, personal spending data was reported as worse than expected, which could help to delay a potential rate hike.
This week we will see the release of Manufacturing Purchasing Managers’ Index (PMI) on Tuesday, and continued growth is expected. The focus of the week will be on the non-farm employment figure, released on Friday, with numerous figures released leading up to this data release. The expectation is a stable figure in line with last month’s; if the figure is as expected – or higher – it could provide a spark to conversations about the possibility of an imminent interest rate hike by the Federal Reserve.
Will the Chinese rout show signs of subsiding?
Although this week is a particularly busy one, much of the focus will remain on China and how it can reignite its economy. Since the devaluation of the yuan, all commodity currencies have been struggling, and it will only be when the Chinese sort out their markets that we will see any real recovery. This morning, China announced that its manufacturing sector is contracting and slipped to a three year low last month.
It’s looking like a busy week ahead for the commodity currencies. The Reserve Bank of Australia (RBA) last night voted to keep interest rates on hold, stating it was appropriate to keep monetary policy accommodative. The hectic pace continues, with growth, trade balance and retail sales data released from Australia on the following days.
Friday will be the busiest day for the Canadian dollar, with the release of the Canadian unemployment rate and the Ivey Purchasing Managers’ Index (PMI).