Morning Report: 3 November 2015

3rd November 2015 By: Ranko Berich

GBP The boost sterling received from yesterday’s firm Manufacturing data has proved to be short lived, and GBP is now trading broadly unchanged compared to late Friday vs EUR and USD. October’s Manufacturing Purchasing Managers Index was indeed very strong, with the index rising to 55.5 from 51.8 previously as survey respondents reported a marked pickup in manufacturing growth. New order growth in particular was reported to be strong by Markit, the research firm running the survey. The Middle East, East Asia and the USA all saw improving new work orders, with the eurozone notably absent. As Markit’s Senior Economist Rob Dobson said, the question now is if this uptick is the beginning of a more durable improvement in external demand and conditions for manufacturers or just a temporary blip. Today at 09:30 GMT, the equivalent PMI for the Construction Industry will be released.

EUR Yesterday’s session saw the euro consolidate its recovery from last week’s lows, with EURUSD stabilising slightly after seeing a strong rally on Thursday and Friday. Purchasing Managers Indices for the Manufacturing sectors of several eurozone economies including France, Germany and Italy all showed activity improving at a surprisingly solid rate, while eurozone Manufacturing PMI was basically unchanged. Today will be a slow day for the euro, with only a minor speech from European Central Bank President Mario Draghi scheduled at 19:00 GMT.

USD USD has had a rather subdued start to the week, with AUDUSD being the biggest mover overnight as AUD strengthened after the Reserve Bank of Australia again kept interest rates overnight. Yesterday’s Manufacturing Purchasing Managers Indices in the United States were far less encouraging than those in the eurozone and United Kingdom, with ISM and Markit PMIs remaining basically unchanged in the low 50s, indicating slow but steady expansion in the sector. Construction Spending rose 0.6% in September, possibly indicating that the sector could pick up slack left by manufacturing this quarter. Vehicle Sales will be reported by various manufacturers this afternoon, and official Factory Orders data for September will be released at 15:00 GMT.

CAD After some sharp downwards moves on USDCAD on Friday, the Canadian dollar failed to strengthen any further yesterday. RBC’s Manufacturing Purchasing Managers Index fell further into contractionary territory, according to October’s survey, which recorded a record low in optimism for that month. No data will be released today, meaning Wednesday’s Trade Balance data is the next major CAD event.

UK News

  • FT. London ‘living wage’ rises to £9.40 an hour: The voluntary London “living wage” has risen 25p to £9.40 an hour, well above the new minimum pay rate set by the government.
  • Reuters. UK export growth hits six-year low – British Chambers of Commerce: British exporters experienced the weakest growth in orders since the depths of the financial crisis in the three months to September, a survey showed on Tuesday, adding to signs that overseas demand has faltered.
  • Reuters. SUK current account deficit may reflect corporate tax avoidance – ECB’s Lane: Britain’s large current account deficit may be less serious than it appears due to distortions created by companies avoiding tax, incoming European Central Bank policymaker Philip Lane said in a research article published on Tuesday.
  • Reuters. UK factory PMI surges to 16-month high, exports recover: Growth at British factories surged unexpectedly to a 16-month high in October, helped by a recovery in export orders, according to a survey that will temper some of the concern that the economy is losing steam after two years of gains.