Market News & Insights
1 December 2014

Manufacturing Data Dominates Calendar

EUR/USD 1.2462
GBP/USD 1.5680
GBP/EUR 1.2585 (0.7946)
EUR/CHF 1.2027
GBP/CHF 1.5134
GBP/AUD 1.8515

Friday provided some interesting moves in FX pairs, much of the US remained off and volumes traded were noticeably lower in the afternoon, there were also month end flows to contend with resulting in some interesting volatility across major pairs. On the whole however we saw a stronger USD while commodity linked currencies, especially those linked to oil/gas also faced heavy selling with CAD and the RUB both taking significant hits, the latter also continuing to feel the pinch of restrictions, while the EUR once again pulled back from highs above 1.2500. The tone in overnight markets was somewhat subdued, both AUD and NZD faced selling pressures while Asian markets traded in mixed territory. The Nikkei traded higher while the JPY weakened, USDJPY reaching fresh highs above 119.00. In early trading this morning USD is marginally weaker against the GBP and EUR, while GBP is outshining the single currency (EUR).

The EUR has already received a basket of mixed data thus far this morning, Italian and German manufacturing PMI data has already been released and both missed to the downside, what is more notable is the decline in German manufacturing, the reading dropped to 49.5 signifying the industry is in contraction in Germany, while the Italian figure also posts 49.0. The French figure was marginally firmer but at 48.4 still well in a contraction phase as well, the Eurozone composite figure was just above the contraction/expansion level at 50.1. The EUR continued to carry the potential for further weakness and this week will be telling into the year end, the ECB are due across the wires on Thursday and while we expect no further changes to interest rate policy markets will be keen to hear details on the potential for further easing. Should the ECB continue to remain quiet on exact details, or content to “wait and see” how current easing impacts over the coming months there may be some scope for further EUR strength, needless to say exact details on a potential QE program will start the EUR slide once again.

GBP data has not been as bad as the currency’s performance might suggest, recent rhetoric from the BOE has pushed the pound significantly lower as markets look to re-price the timing for the BOE’s first rate hike with most now looking out to the 4th quarter 2015, but the BOE have been insistent that the interest rate and inflation outlook would remain data dependent. Today we have manufacturing data due for release and the report is expected to show a slowdown in the pace of manufacturing growth through November, albeit still expanding with expectations for a reading of 53.0 down from 53.2 last month. Consumer credit and lending data also cross the wires this morning.

Looking towards the US session and we should see normal market conditions return after last week’s Thanksgiving day holiday break, once again manufacturing data tops the bill in terms of economic releases with expectations of a small pullback in US manufacturing data to 58 from 59, again a slowdown in manufacturing carries the ability to temper Fed rate hike expectations and may see the USD give back some of Friday’s gains. Later in the evening there are several Fed speakers, once again we’ll be keeping an eye on comments from Fed speakers to see if there are any fresh indications or changes in the Feds outlook for the economy.