Morning Report: 4 November 2015

4th November 2015 By: Ranko Berich

GBP Sterling strengthened versus most of the G10 currencies yesterday, continuing last week’s rally. This morning has already seen the release of some sharp Services Purchasing Managers’ Index data, which showed a strong increase in optimism, matching similarly optimistic results from this week’s Manufacturing PMI. Nonetheless, markets are awaiting tomorrow’s “Super Thursday”, where the Bank of England’s latest interest rate decision will be released alongside the Inflation Report, which includes the Bank of England’s last economic projections for 2015. Amid an improving labour market, recovering manufacturing sector and concerns about a strong currency and near zero inflation, tomorrow’s release could influence sterling’s direction for several months.

EUR The euro is now again falling after its modest recovery at the end of last week. The European Central Bank’s Mario Draghi has been attending a forum on Banking Supervision in Frankfurt, talking through the Single Supervision Mechanism (SSM), and also stating that quantitative easing would be examined in December. Draghi’s bearishness has further weighed on the euro, although this probably suits the media savvy governor, who is usually happy talking the single currency down. This morning has already seen the release of Purchasing Managers Indices for several eurozone countries, reflecting modest but satisfactory growth in the sector across the eurozone, with the best performance coming from Spain.

USD The dollar strengthened against most of its G10 peers overnight, although sterling did manage to resist any further weakness to the Greenback. Yesterday’s data releases featured decent overall Vehicle Sales, but a large drop in monthly factory orders, underlining the worrying slowdown that is developing in the US manufacturing sector. Today will be less about fundamental data and more about central bank spears: no less than three prominent voting members of the rate setting Federal Open Market Committee will speak today. Lael Brainard, who has recently been vocal in opposing the Fed’s prevailing desire to hike rates in the near future, will speak at 10:30 GMT. Fed Chair Janet Yellen will then testify to lawmakers at 15:00, on Banking Regulation, followed by a speech from the New York Fed’s Bill Dudley at 19:30. The data calendar will include ADP’s estimate of Non-Farm Payroll growth, released at 13:15 GMT, followed at 15:00 by ISM’s Non-Manufacturing Purchasing Managers Index.

CAD CAD had a volatile day yesterday, at first weakening dramatically in the morning before rallying in the afternoon to actually reach its strongest level vs USD in several weeks. Action in USD trading and crude oil markets drove the moves, as there were no headline Canadian data releases. Today’s Canadian data is unlikely to be a major market mover, with Trade Balance scheduled for 13:30 BST. However, Crude Oil Inventories in the United States will be released at 15:30, and may prove more influential.

UK news

  • Reuters NIESR nudges down growth forecasts for 2015 and 2016: Britain’s economy is likely to grow slower than previously expected this year and next, after posting the fastest expansion among major advanced economies last year, a think tank predicted on Wednesday.
  • Reuters UK shop prices drop again, more falls expected: Prices in British shops in October were 1.8 percent lower than a year earlier, a slightly less marked rate of decline than in September, the British Retail Consortium said on Wednesday.
  • Guardian UK construction data cheers markets and bolsters sterling: October’s purchasing managers’ index for the building industry shows the sector in rude health, according to analysts.