British Pound May Rise if Upbeat PMI Cools BOE Easing Speculation
- British Pound may rise if upbeat PMI data cools BOE easing speculation
- US Dollar looks to ISM report, comments from Fed’s Mester for direction
- Aussie Dollar gains after Chinese Manufacturing PMI hits 22-month high
UK Manufacturing PMI data headlines the economic calendar in European trading hours. The report is expected to show factory-sector activity contracted for a second consecutive month in August, albeit at a slower pace. UK economic news-flow has increasingly improved relative to consensus forecasts in recent weeks, opening the door for an upside surprise.
Such a result may trim bets on near-term BOE stimulus expansion, boosting the British Pound. As it stands, financial markets are pricing in 40 basis points in further easing over the coming 12 months. Interest-rate futures imply no changes in the baseline lending rate over that period however, hinting that perhaps the markets envision an unconventional approach to accommodation (a further QE expansion, perhaps).
Fed policy speculation returns to the forefront later in the dayas Augusts’ ISM Manufacturing report and scheduled commentary from Cleveland Fed President Loretta Mester cross the wires. An upbeat ISM result in line with recent improvement data outcomes relative to consensus forecasts coupled with rhetoric toeing the line set by FOMC leadership in recent days May boost the US Dollar. Follow-through may be limited as traders reserve firm judgment until after Friday’s release of official labor-market data.
The Australian Dollar traded higher overnight after the official set of Augusts’ Chinese PMI figures crossed the wires. The reports showed a mild slowing in service-sector activity but the manufacturing sector unexpected roared back to life, with the pace of growth surging to the highest level since October 2014.
China is Australia’s largest trading partner and improving performance there may bolster the latter country’s growth prospects, limiting scope for further RBA interest rate cuts. Indeed, the Aussie rallied alongside front-end bond yields after the PMI roundup crossed the wires. The Japanese Yen likewise traded higher in a move that seemed to be corrective after the currency broadly underperformed against its major counterparts in yesterday’s session.
What do past price patterns hint about where currencies will go next? Find out here !
|22:45||NZD||Terms of Trade Index (QoQ) (2Q)||-2.1%||-1.5%||4.1%|
|23:30||AUD||AiG Perf of Mfg Index (AUG)||46.9||-||56.4|
|23:50||JPY||Capital Spending Ex Software (2Q)||3.1%||5.5%||4.3%|
|23:50||JPY||Company Profits (2Q)||-10.0%||-||-9.3%|
|23:50||JPY||Company Sales (2Q)||-3.5%||-||-3.3%|
|00:00||AUD||CoreLogic House Px (MoM) (AUG)||1.1%||-||0.8%|
|00:30||JPY||Nikkei Japan PMI Mfg (AUG)||49.5||-||49.6|
|01:00||CNY||Manufacturing PMI (AUG)||50.4||49.8||49.9|
|01:00||CNY||Non-manufacturing PMI (AUG)||53.5||-||53.9|
|01:30||AUD||Private Capital Expenditure (2Q)||-5.4%||-4.0%||-5.2%|
|01:30||AUD||Retail Sales (MoM) (JUL)||0.0%||0.30%||0.1%|
|01:45||CNY||Caixin China PMI Mfg (AUG)||50.0||50.1||50.6|
|05:00||JPY||Vehicle Sales (YoY) (AUG)||-||-0.2%|
|05:30||NZD||RBNZ Head of Prudential Supervision Speaks||-||-||-|
|06:30||AUD||Commodity Index AUD (AUG)||-||90.5|
|06:30||AUD||Commodity Index (YoY) (AUG)||-||-2.0%|
|07:15||CHF||Retail Sales Real (YoY) (JUL)||-||-3.9%||Low|
|07:30||CHF||PMI Mfg (AUG)||50.6||50.1||Low|
|07:45||EUR||Markit/ADACI Italy Mfg PMI (AUG)||51.2||51.2||Low|
|07:50||EUR||Markit France Mfg PMI (AUG F)||48.5||48.5||Low|
|07:55||EUR||Markit/BME Germany Mfg PMI (AUG F)||53.6||53.6||Medium|
|08:00||EUR||Markit Eurozone Mfg PMI (AUG F)||51.8||51.8||Medium|
|08:30||GBP||Markit UK PMI Mfg SA (AUG)||49.0||48.2||High|
|CCY||Supp 3||Supp 2||Supp 1||Pivot Point||Res 1||Res 2||Res 3|
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To receive Ilya's analysis directly via email, please SIGN UP HERE
Contact and follow Ilya on Twitter: @IlyaSpivak
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.