‘Buck’ (USD) Sentiment on Downturn after US Manufacturing PMI Proved Decidedly Dovish to Dampen Fed Interest Rate Bets
While the GBP/EUR exchange rate held its gains overnight, due to a lack of further data from either the Eurozone or UK, the ‘Greenback’ (USD) was sent into a fresh slump as a result of the ISM Manufacturing PMI. Showing that domestic manufacturing output had declined beyond forecasts to print at narrow growth of 50.2 this spurred an increased uptrend for the GBP/USD pairing.
A less dovish than anticipated UK Manufacturing PMI has seen the Pound (GBP) continue to make gains today, as both the Euro (EUR) and ‘Buck’ (USD) remain soft.
Underperforming Eurozone PMIs are Weighing on the Single Currency (EUR) Today as GBP/EUR Conversion Rate Advances
After the disappointment of Wednesday’s rising Eurozone Unemployment Rate and negative Eurozone Consumer Price Index, the common currency (EUR) remained on a general downturn overnight. The prospect of deflation within the currency union naturally led to speculation that the European Central Bank (ECB) could be prompted to introduce fresh monetary loosening policy in order to shore up the local economy. This morning’s finalised Eurozone Manufacturing PMIs have not been of particular support to the ailing Euro, as production was shown to have slowed to multi-month lows in Germany, Spain and Italy. Although the French manufacturing sector saw an uptick, rising above the neutral 50 point baseline that divides expansion from contraction, this was ultimately not enough to boost the single currency from its slump.
Better-than-Expected UK Manufacturing PMI Reassuring Traders to Keep Sterling (GBP) Up Against Rivals
Following up a day of mixed data, the Pound (GBP) was more strongly supported today by the release of the September Manufacturing PMI, which printed at a smaller decrease than had been anticipated. Thus, although output in the industry slowed on the month this figure still proved to be more hawkish fuel to investors as Sterling climbed against a number of its major currency rivals. This solid enough performance provided some reassurance to those doubting the recovery of the UK economy and its ability to weather out the current global slowdown, raising hopes that the case may be progressing for a nearer-term Bank of England (BoE) interest rate rise.
‘Buck’ (USD) Softening on Lack of Fed Clarity as Markets Remain Uncertain of 2015 Rate Rise Odds
Although traders had been hoping for some greater clarity on the stance of the Federal Open Market Committee (FOMC) overnight from words delivered by Chair Janet Yellen, the policymaker made no reference to the matter of a US interest rate hike. As such, the ‘Greenback’ (USD) continued to trend cautiously as investors were reluctant to commit to the currency ahead of the more crucial US data due for release before the weekend. Bets were also not encouraged by an unexpectedly marked decline on the Chicago Purchasing Manager Index, which contracted to 48.7, as this was considered to reflect negatively upon the prospects of Thursday’s national manufacturing figure.
GBP/USD Exchange Rate Could Continue to Make Gains Ahead of Upcoming US Employment Data, GBP/EUR Likely to Hold on Uptrend
This afternoon’s ISM Manufacturing Survey for the US could provoke some additional volatility on the GBP/USD pairing, although the ‘Buck’ does not look likely to rally on the forecast reduction of the economic index. Ahead of Friday’s crucial domestic Unemployment Rate and Change in Non-Farm Payrolls, however, the US Dollar stands to remain on a relatively bearish footing.
As no further major Eurozone releases are scheduled for release this week, the Euro is likely to hold its recent losses, unless ECB policymakers choose to comment upon the current economic climate of the currency union. Tomorrow’s UK Construction PMI would otherwise seem to be the only other prominent influence on the GBP/EUR exchange rate ahead of the weekend, with another good performance from the nation’s industry sure to keep the pairing on an uptrend.