UK PMI figures to support growth
This week is a fairly big week for the pound as a slew of UK PMI data will be released throughout the week as well as the all important rate announcement scheduled for midday Thursday. Construction and services PMI figures are expected to show expansion in all three industries whilst today’s release of manufacturing PMI was the highest in over 2 years, pointing to stable growth. Positive readings will increase speculation that the base interest rate may rise earlier than the BoE has predicted. The rate announcement due on Thursday is unlikely to see the central bank alter the base rate, however, the market will be listening attentively to the comments made by Carney following the release. After Carney’s speech last week we doubt anything said in Thursday’s accompanying statement will differ, however, the governor may use this opportunity to address the rising market rates. For the time being we feel that the pound will benefit from good data releases, rising gradually over the course of the week.
Could September be the month for QE tapering?
August ended on a high for the US dollar when preliminary GDP figures surprised to the upside reporting a 2.5%q/q increase. This contributes to mounting evidence that the US economy is experiencing a solid recovery. The US will release ISM manufacturing figures tomorrow, while other important figures such as unemployment claims, the unemployment rate and non-farm employment change are published later in the week. As the Federal Reserve monetary policy meeting draws closer, these figures will be of even more significance as they will either support the Fed’s case for reducing stimulus, or encourage policy to remain on hold. If data continues to surprise to the upside ahead of the September 18 meeting it will increase speculation that tapering could begin as soon as this month. Although mixed data results may suggest the will Fed hold off on reducing its quantitative easing programme for a little longer, the overall outlook for the US is still very positive and therefore we expect US dollar gains to continue gradually throughout the week.
Positive Spanish and Italian PMI data kick start a potentially good week for the Euro
The eurozone has been producing some good data of late which in response has resulted in the euro preventing sterling from extending gains. This morning Spanish and Italian PMI data was released showing the manufacturing sector expanded with both figures beating estimates at 51.1 and 51.3 respectively. These results indicate that growth in the manufacturing sector is visible across a number of the eurozone nations with even Greece’s decline easing. Services PMI data for Spain and Italy will be published later this week as well as retail sales and German industrial production. The main event this week will be the ECB rate announcement on Thursday, and although no change in policy is expected, it will be interesting to hear the views from the monetary policy committee on the state of eurozone economies. Although recent indications point to the eurozone stabilizing, with the outlook for the UK looking brighter and the US considering winding down their asset purchasing program, loopholes in other euro area fundamentals mean the odds are not in the euro’s favour. Good eurozone figures this week could limit sterling and US dollar gains but we do not see the euro strengthening considerably this week.
End of week forecast
GBP / EUR
|
1.18
|
GBP / USD
|
1.5475
|
EUR / USD
|
1.3190
|
GBP / AUD
|
1.7450
|
Currency Analyst
Caxton FX
No comments:
Post a Comment