GBP/EUR 1.1659 (0.8570)
The first day of the third quarter brought us a host of data from both the Eurozone and the US, whilst in the UK the BOE welcomed in Mark Carney. Data from Europe supported the single currency, US data was somewhat mixed and data from the UK saw manufacturing post its strongest performance in more than two years.
Mark Carney took office in the BOE and there has been plenty of press and market chatter as people speculate on the possible changes Carney can make. Thursdays BOE meeting may be a bit soon to see any changes but we’d hope to get some guidance or indication on intent from the new governor. He was welcomed to office with stronger than expected UK data as the Manufacturing PMI figures for June beat expectations and posting 52.4 versus 51.4 expected. This is the highest reading we have seen since May 2011 with increases seen in production, with demand both foreign and domestic remaining solid. This affirms the UK’s slow progress towards meaningful growth but the pace of recovery remains concerning for many.
The headline figures from the Eurozone also showed improvements in Manufacturing with the composite reading beating expectations posting 48.8 versus 48.7, helped by stronger readings from Italy and France, although the German input was slightly lower than expected. The readings did still show the industry in contraction albeit the improvement shows that contraction is slowing. The Eurozone is expected to have exited recession in Q2, however its performance in Q3 will likely be tantamount to recovery.
Elsewhere for the Eurozone the unemployment figures rose to 12.1% from 12%, although the increase was not as bad as expected and the figure was helped by downward revisions to previous month’s readings. The bigger concern is the disparity in unemployment across the Eurozone and once again highlights a two tiered economy operating in Europe. CPI inflation data rose from 1.4% to 1.6% but this is mostly linked to increases in energy prices with the core inflation reading expected to fall later in the year as energy pricing comes back in line.
Data from the US yesterday was also in line with global improvements in manufacturing. The ISM reading rose to 51.9 from 49.0 in May. Looking at the underlying data a rise in construction of .5% combined with some upward revisions indicates the residential sector saw signs of improvements. This bodes well for the QE tapering camp as it would indicate a small increase in Q2 GDP figures and a slight revision higher from previous estimates. The next major release this week that will reflect tapering expectations will be jobs data due on Friday.
Today’s calendar is somewhat lighter, with no real major data of note. The RBA maintained interest rates at 2.75% overnight but warnings of further cuts and concerns of a slowdown in Australia continue to see the AUD under pressure. UK Construction PMI is due at 9.30 and again this is due to show signs of improvement. Eurozone producer price data is expected but unlikely to have too much of an impact following yesterday’s CPI figures, factory Orders top the US session.