PMI In Europe Is Going Up, So What Do You Do This Week? On today’s market update, GBP/USD is currently trading at 1.5550, GBP/EUR is at 1.1810, so Sterling higher against both the Euro and the United States dollar compared to where it was this time on Monday, courtesy of that UK manufacturing PMI, 57.2 – the highest level since February of 2011 and as part of that, the output components, the new orders component also hit the highest levels since 1994. Employment is also moving higher as well, the fourth consecutive month of gains – so it looks like the manufacturing sector is contributing very positively to UK GDP at the moment. A lot of people out there are now saying that UK third quarter GDP is likely to be higher than that 0.7% that we saw for the second quarter, the first revision coming out of 0.6% and maybe revised higher to 0.7%. So people are now looking for something maybe with the 1% handle before the end of the year from the UK economy. So this is very good news there and Sterling obviously pushing forward as a result. This is despite a good European PMI as well, every sing PMI in the Euro zone apart from that of France improving on last month’s figure. Some were obviously in negative territory, things like Greece, Ireland for example, however, the Netherland, Spain, Italy, Spain, Germany and Austria, hitting the highest levels in 2-years. So we are seeing some signs of obviously a European recovery starting to kick on and hopefully, that’s something the ECB tends to emphasize at their meeting on Thursday. They would obviously continue to emphasize however, that the Euro zone recovery is not something which can be guaranteed at the moment and the rates would have to stay lower for longer – the continued ECB forward guidance they introduced a couple of months ago. Given it was a bank holiday in the United States on Monday, they was no data out of the U.S. The U.S. manufacturing PMI is expected later on today and it is expected to come out a little bit lower than last month. People are starting to get a little bit worried about the data coming into September, coming into the argument about whether tapering of Fed assets purchases should take part or take a course in the month of September. The fact is that, of the twenty-three pieces of data apparently released in August by the U.S. economy, only eight beat estimations. So we’re not really seeing a very strong U.S. recovery as it stands at the month. I’m still worried about the growth side of things and also the inflation side of things. It seems to be that a lot of people are pricing in that this week’s non-farm payroll figure is a fairly binary yes/no on whether we’ll see some form of tapering. If it’s a bad figure, obviously we won’t, I can still think if it’s a good figure, unless it’s a massive figure of around 300K for example, that we’re not going to see any movement from the Fed later on this month. Even so, the dollar was fairly quiet on Monday as a result of that U.S. holiday. Overnight, the Reserve Bank of Australia held rates as was widely expected. We are still looking for a rate cut of 0.25% by November time of this year for the AUS/USD – the AUS/USD is a little bit stronger on the fact that they held rates overnight. Data wise, today is probably the quietest day of the week, with that manufacturing ISM from the U.S. latter in the day, and constructing PMI also expected out of the UK, which hopefully would suggest that the manufacturing sector is going at 0.7 and the construction sector maybe catching up for example. It does get very busy latter on in the weekend, with the NFP being expected on Friday.
Posted on: Wed, 04 Sep 2013 08:15:22 +0000
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