Boris – Its my deal or no deal
Despite manufacturing PMI’s strengthening to 48.3 for September, it the fifth month on the trot in contractionary territory. Manufacturing orders and production continued to decline with significant weakness in investment and job losses accelerated. Business confidence was marginally improved and stockpiling resumed due to Brexit uncertainty. Sterling briefly recovered, but it wasn’t to last and selling quickly resumed. Sterling dipped to near 1.2200 on the Dollar and 1.1185 on the Euro.
After the close, reports emerged of potential EU concessions on the backstop. The Pound spiked to 1.1235 on the Euro before the reports were denied eroding the gains against the Euro but settling near 1.2300 on the Dollar. Boris Johnson will unveil the Brexit proposals later today and speculation is that the backstop plans will not be supported by the EU, especially Ireland. It’s likely to be another turbulent day for the Pound.
US Chicago Federal Reserve (Fed) President Evans stated that after the rate cuts the central bank should leave policy on hold for some time. Although he also reiterated that the Fed needs whatever it takes to meet its mandate, he expected recent rate cuts to push inflation to 2.2%. The rhetoric overall triggered fresh doubts whether there would be further rate cuts this year which helped maintain positive dollar rhetoric ahead of the US open with a 29-month high and the Euro below 1.0900.
The ISM manufacturing index declined to 47.8 for September from 49.1 the previous month which was well below consensus forecasts of 50.4 and the lowest reading since June 2009. The new orders index improved only marginally and remained in negative territory with production also in contraction while employment declined at a faster pace on the month. Only one of the components was in expansion territory which triggered a fresh of concern over the manufacturing and wider outlook.
The Euro registered its lowest daily close against the Dollar yesterday since May of 2017 at 1.0880 and has edged slightly lower at the start of today’s trading session as the common currency struggles to find demand following uninspiring inflation data.
In its preliminary estimate on Tuesday, inflation figures measured by the Consumer Price Index (CPI), ticked down to 0.9% on a yearly basis in September. Meanwhile, the IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) came in at 41.7 in Germany to beat market expectation of 41.4 but did little to nothing to help the Euro in finding any demand.
There are no macroeconomic data releases from Euroland today and as of writing, the Euro finds itself against the Dollar at 1.0921.
Data to watch
13.15 USD – ADP Non Farm Employment Change
15.30 USD – Crude OIl Inventories
15.50 USD – FOMC Member Williams Speaks