Sterling consolidates gains ahead of NFPs3rd November 2018
Positive Brexit news triggered a Sterling rally across the board yesterday. The compounding effect of reports that UK financial services companies will have continued access to European markets and a Brexit Deal conclusion in November prompted some aggressive short-covering (buying Pounds to reverse bets against) in GBPUSD.
The positive momentum remained despite disappointing UK manufacturing PMI data and the EU dismissing the reports of the Brexit financial services deal. An unexpectedly hawkish Bank of England rate hike outlook, noting that more rate hikes might be needed as there could be overheating in the economy during the second half of 2019, gave more reason to buy Sterling. Mark Carney also commented that investment and demand would grow with Brexit deal clarity. Open interest in GBP futures markets rose and volumes rose for the third session in a row, which should reinforce the current price action.
A downbeat UK construction PMI report today cannot be ruled out following the disappointing manufacturing data, but given its lesser impact on UK GDP, it would need to fall well short to halt the positivity. The Pound opens this morning at 1.1390 against the Euro and 1.3027 against the Dollar.
The Dollar is trading lower today with the EURUSD rate up to 1.1440 whilst GBPUSD is up to 1.3020, extending the rally from yesterday’s territories.
Trump has reportedly instructed his cabinet to prepare a trade deal with China. The news boosted stocks and weighs on the Greenback.
After beating expectations on Wednesday, US data disappointed yesterday. The ISM Manufacturing PMI fell to 57.7 points in October, below the highs seen earlier this year. The figures lead up to the all-important Nonfarm payrolls report due today.
The US economy is expected to have added 190K new jobs in October and the unemployment rate is seen holding steady at 3.7%. The key focus, however, will be on the average hourly wage growth data, expected to have recorded their largest annual gain in over nine years, which might reinforce market expectations for gradual Federal Reserve monetary policy tightening, even beyond 2018, which might eventually provide a near-term lift to the Greenback.
Yesterday was a strong day for the Euro, rising 1% in a day and recovering to 1.1420 against the Dollar. An increase in CPI data out of the EU, combined with the Bank of England reporting they would raise interest rates in 2019, was the main driver behind the upsurge in the single currency.
Other than that there was very little news on the European front, with data coming in on consensus and a strong day for stocks. boosting currencies. Today sees PMI data out of Spain, Switzerland, Italy, France, Germany and Europe but all eyes are on the US with the Nonfarm payrolls.
Data to Watch:
08:15 CHF Real Retail Sales (YoY) (Sep)
08:55 EUR Markit Manufacturing PMI (Oct)
09:00 EUR Markit Manufacturing PMI (Oct)
09:30 GBP PMI Construction (Oct)
12:30 USD Average Hourly Earnings (YoY) (Oct)
12:30 USD Nonfarm Payrolls (Oct)
12:30 USD Unemployment Rate (Oct)
12:30 USD Average Hourly Earnings (MoM) (Oct)
12:30 USD Labor Force Participation Rate (Oct)
12:30 USD Trade Balance (Sep)
12:30 CAD Unemployment Rate (Oct)
12:30 CAD Participation rate (Oct)
12:30 CAD Net Change in Employment (Oct)
13:30 CAD International Merchandise Trade (Sep)
14:00 USD Factory Orders (MoM) (Sep)
17:00 USD Baker Hughes US Oil Rig Count
22:45 NZD Building Permits s.a. (MoM) (Oct)