Sterling is trading slightly lower this morning, having shaken off a brief bout of midweek softness to close broadly flat against the US dollar last week. The General Election campaign is now in full swing, with polls indicating a lead for the Conservative Party, although a high proportion of undecideds in certain crucial areas, combined with the fact that there are four major parties polling above 10%, means that prediction of the outcome will be very difficult. This morning’s data has included the Construction Purchasing Managers’ Index, which ticked up slightly to 44.2 in October, still well below the 50 level that indicates overall growth in the sector. The week’s main event for sterling will be Thursday’s Bank of England rate decision, which is unlikely to see any rate cut but could well see a bearish reassessment of the economy, in light of the recent cooling in the labour market, and worsening global conditions.


The EURUSD exchange rate continued to offer an effective solution for insomnia last week, and has been uneventful since this morning’s open. This morning’s data has included a crop of Manufacturing Purchasing Managers Indices for various Eurozone countries, including a sharp slowdown in the Spanish index. Manufacturing across the Eurozone remains in contraction due to weakening global conditions, and this morning’s figures largely confirmed this picture. The widely followed Sentix Investor Confidence Index was also released, and while remaining in negative or contractionary territory overall, did show an improvement from last month. The week’s data includes Services PMIs on Wednesday, and updated economic forecasts from the European Commission on Thursday.


After weakening on the whole last week the US dollar is enjoying a slight bid this morning against haven currencies such as CHF and JPY. The morning’s headlines feature some vaguely positive noise from US-China trade talks, as US Commerce Secretary Wilbur Ross expressed optimism about a “Phase One” trade deal being struck “very shortly”. Last week saw equity markets respond extremely favourably to similar positive sentiment, with the S&P 500 reaching fresh all time highs, suggesting investors remain credulous about the prospect of easing trade tensions. US FActory Orders will be released today at 15:00 GMT. Tomorrow, the ISM Non-Manufacturing Survey will be released, and will be very interesting considering how dismal recent ISM surveys have been compared to hard economic data such as retail sales, growth, and job creation.


The loonie managed to regain some of Wednesday’s losses from a dovish Bank of Canada over the course of Thursday and Friday, but is trading marginally weaker this morning against the US dollar. Tuesday will see the release of monthly Trade Balance data, followed on Friday by labour market and Housing Starts releases.


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