Market Info

Cable drops further following some good US releases

03/10/2017 | OzForex

United States Dollar:

The dollar rose against a basket of major currencies after data showing manufacturing activity rose to its highest since 2004 fuelled expectations of solid third-quarter economic growth. The Institute for Supply Management (ISM) said its index of national factory activity surged to a reading of 60.8 last month, the highest reading since May 2004, from 58.8 in August. That beat economists’ expectations of a reading of 58. Demand for the Dollar was also underpinned amid speculation that U.S. President Donald Trump is considering former Federal Reserve Governor Kevin Warsh to succeed current Fed Chair Janet Yellen at the central bank. Warsh is seen as more hawkish than Yellen so his appointment could lead to a faster pace of interest rate hikes. Little on the docket today from an economic point of view, we do however get to hear from FOMC member Powell.

The Pound extended losses during Monday after data showing that UK factory growth slowed in September, indicating that the economy could be losing momentum. Financial data firm Markit said its UK manufacturing purchasing managers'' index fell to 55.9 from August’s 56.7, weaker than forecasts for a reading of 56.4. While growth remained solid softer growth in new orders and a slowdown among producers of investment goods raised concerns over the outlook for the coming months. "The growth slowdown in September is a further sign that momentum is being lost across the broader UK economy," said Rob Dobson, director at survey compiler Markit. Cable dropped to a low of 1.3240, the lowest since September 14th. Today sees the next round of PMI’s, construction, this coming in at 9.30am.

We expect a range today in the GBP/USD 1.3200 to 1.3300

Euro:

Spain’s crisis continued following Sunday’s vote for independence in Catalonia. Results showed voters had overwhelmingly backed independence in the referendum, which Spain has ruled illegal and which opponents of secession mostly boycotted. The vote was valid and must be implemented, said Catalan leader Carles Puigdemont. European leaders seem to be taking a backseat in all of this, hinting this is an internal matter. It’s all still unclear as to what the outcome will be but as the ballot has no legal status but will certainly ruffle a few feathers. On the economic front, data on Monday showed that factory activity in the euro area expanded at the fastest rate since early 2011 in September, with the manufacturing purchasing managers’ index jumping to 58.1 from 57.4 in August.

We expect a range today in the GBP/EUR rate of 1.1270 to 1.1350p>

Aussie and Kiwi Dollars:

The RBA held its cash rate steady at a record low of 1.50% as expected and signaled to markets that the economy continues to improve. Earlier, Australia reported that building approvals rose 0.4% on month in August, below the 1.1% gain expected, while private house approvals fell 0.6%, compared to a 1.0% gain in July. GBP/AUD hit through the 1.70 immediately after the release but has since fallen below.

The New Zealand dollar edged lower through trade on Monday. With little domestic data on hand to drive direction the Kiwi took its cues from offshore impetus and risk appetite flows. Having touched intraday highs at 0.7220 the NZD was forced lower following an uptick in U.S factory orders.

We expect a range today in the GBP/AUD rate of 1.6920 to 1.7100

We expect a range today in the GBP/NZD rate of 1.8410 to 1.8550

Data Releases

AUD: AIG Services Index

EUR: Spanish Unemployment Change, PPI m/m

GBP: Construction PMI

NZD: GDT Price Index

USD: FOMC Member Powell Speaks

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