US heads to the Polls13th November 2018
UK Services PMI failed to meet forecasts with a print of 52.2 in October, the lowest figure since March, and new business growth increased at the slowest pace since July 2016. Sterling continued to fluctuate on Brexit headlines and sources suggested that the timeframe for an extraordinary EU Summit had been pushed back to late November. Although this curbed some Sterling purchasing, the increased optimism over a deal continued to trigger underlying short covering. Sterling secured a sustained move above 1.3000 against the Dollar while the Euro briefly fell past 1.1425.
Overnight BRC retail sales data printed a 1.3% increase year-on-year which, in the first month of the biggest retail earnings quarter, is weak. Political developments continue to drive trading and reports of EU concessions underpinned Sterling sentiment as it holds above 1.3050 against the Dollar and 1.1450 on the Euro.
After weeks of gains flying high on positive employment, earnings, and GDP news, the Dollar took a dip relative to competing currencies.
The US PMI services index was revised slightly higher to 54.8 from the flash reading of 54.7. The ISM non-manufacturing index declined slightly to 60.3 from 61.6, although this was above consensus forecasts. New Orders and business activity remained at a very high level historically while there was a modest slowdown in the rate of growth in employment and prices.
There’s an element of caution ahead of today’s mid-term congressional elections because of the risk of an unexpected result. Consensus forecasts are for the Democrats to win control of the House of Representatives with the Republicans maintaining control of the Senate. There were also expectations that a Democrat win in the House would push the Dollar slightly lower.
Italy remained in focus on Monday, with a report that the EU Commission might propose disciplining Italy under fiscal rules set by the EU unless the Italian government agrees to change its draft budget. Versus the Dollar, the Euro hit 1.1350 off the back of this news but recovered slightly during trading to over the 1.1400 mark.
French Finance Minister Le Maire came out and said that the Euro was at stake over the Italian budget which showed the market how seriously the rest of Europe see this political unrest. The Eurozone confidence index came in below consensus which only served to increase concerns over the Eurozone growth outlook.
Today sees PMI data out of Spain, Italy, France, Germany and the EU which will have the market’s attention. The final piece of market data that is of interest will be a speech by the European Central Bank’s (ECB) Lautenschlager at midday.
Data to Watch:
24h USD US Mid-term Elections
08:00 EUR Markit Services PMI (Oct)
08:00 EUR Markit PMI Composite (Oct)
08:15 ESP Markit Services PMI (Oct)
08:55 GER Markit PMI Composite (Oct)
08:55 GER Markit Services PMI (Oct)
12:00 EUR ECB’s Lautenschläger Speech
n/a NZD GDT Price Index
18:00 USD 10-Year Note Auction
21:30 AUD AiG Performance of Construction Index (Oct)
21:45 NZD Participation Rate (Q3)
21:45 NZD Employment Change (Q3)
21:45 NZD Unemployment Rate (Q3)
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