GBP/EUR 1.1765 (0.8500)
European growth data will be driving markets today as the US is on a bank holiday and Syrian tensions continue to linger. Fear took a step back but uncertainty prevails as the US has held off on a direct attack on Syria and will put any intervention to a congressional vote. While any escalation can still carry concerns for global markets, as it stands markets continue to give back some of last week’s moves.
Oil has traded back from three year high and gold is off its three month high as fear subsides somewhat. Risk was also supported in the overnight session with some indication that China is exiting a two quarter slowdown with Official PMI for china jumping to a 16 month high of 51.0, and a separate PMI release from HSBC saw the figure jump from 47.7 last month to 50.1, the largest jump in 3 years. This has boosted risk appetite and seen the European session opening in positive territory.
PMI data released from the Eurozone has been encouraging with some previous under-performing area’s showing indications that they may have bottomed out the pace of contraction and may even be moving toward some positive growth. Spanish and Italian Manufacturing PMI both posted stronger than expected, posting 51.1 and 51.3 respectively, French data posted 49.7 as expected. As you can see figures are still not massively supportive with growth relativity anaemic but it does appear the pace of contraction has bottomed out.
The Eurozone composite figure is due out at 9.00am although German data just release was below expectations. Overall the industry is expected to reach a 26 month high and failure to achieve this is an indication that growth will continue to struggle and we may see increased calls for a rate cut from the ECB this week, particularly after last week’s lower than expected inflation readings.
Manufacturing PMI is also due from the UK and is expected to show continued improvements in the industry with a reading of 55 expected from August’s 54.6. Later in the day Mark Carney will address the press in a briefing ahead of the G20 summit. Any time Carney has spoken in the last month the pound has rallied and it may have further upside ahead.