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British Pound May Rise if Upbeat PMI Cools BOE Easing Speculation

British Pound May Rise if Upbeat PMI Cools BOE Easing Speculation

Talking Points:

  • 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 !

Asia Session

22:45NZDTerms of Trade Index (QoQ) (2Q)-2.1%-1.5%4.1%
23:30AUDAiG Perf of Mfg Index (AUG)46.9-56.4
23:50JPYCapital Spending Ex Software (2Q)3.1%5.5%4.3%
23:50JPYCompany Profits (2Q)-10.0%--9.3%
23:50JPYCompany Sales (2Q)-3.5%--3.3%
00:00AUDCoreLogic House Px (MoM) (AUG)1.1%-0.8%
00:30JPYNikkei Japan PMI Mfg (AUG) 49.5-49.6
01:00CNYManufacturing PMI (AUG)50.449.849.9
01:00CNYNon-manufacturing PMI (AUG)53.5-53.9
01:30AUDPrivate Capital Expenditure (2Q)-5.4%-4.0%-5.2%
01:30AUDRetail Sales (MoM) (JUL)0.0%0.30%0.1%
01:45CNYCaixin China PMI Mfg (AUG)
05:00JPYVehicle Sales (YoY) (AUG)--0.2%
05:30NZDRBNZ Head of Prudential Supervision Speaks ---
06:30AUDCommodity Index AUD (AUG)-90.5
06:30AUDCommodity Index (YoY) (AUG)--2.0%

European Session

07:15CHFRetail Sales Real (YoY) (JUL)--3.9%Low
07:30CHFPMI Mfg (AUG)50.650.1Low
07:45EURMarkit/ADACI Italy Mfg PMI (AUG)51.251.2Low
07:50EURMarkit France Mfg PMI (AUG F) 48.548.5Low
07:55EURMarkit/BME Germany Mfg PMI (AUG F) 53.653.6Medium
08:00EURMarkit Eurozone Mfg PMI (AUG F) 51.851.8Medium
08:30GBPMarkit UK PMI Mfg SA (AUG)49.048.2High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.