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Carney just tell us?

Carney just tell us?

UK construction PMI’s dropped down from 14-month highs to 52.9, below a consensus forecast of 54.8 and Sterling dipped. Bank of England Governor Mark Carney testified, to the Treasury Select Committee, that further interest rate increases are necessary if the economy stays on the current growth path. Alluding to his tenure, he added that there would be “some advantages” to run the succession process once a Brexit outcome is clear. The market perceived his comments as an indication that he would be willing to extend his term.

Sterling gained some support from the rhetoric with the Euro dropping to just above 1.1110 with further Pound buying after the 4pm fix following reports that the EU might be flexible enough to adjust the Irish backstop agreement. Caution surrounding Sterling persists with the Euro holding above 1.1110 while gains on the Dollar were held to just above 1.2850.


There was robust Dollar demand following the Labor Day bank holiday and the Dollar Index strengthened sharply on global trade concerns. The public consultation on Trump’s next tranche of trade tariffs end’s on Thursday, after which he is free to proceed on levying 200Bn on Chinese imports.

The final US manufacturing PMI index edged up to 54.7 from preliminary readings of 54.5, and business confidence hit a 3-month high, although price pressures reduced. ISM Manufacturing surged to a 14-year high of 61.3, smashing consensus forecasts of 57.6. The data revealed notable increases in new orders and production, and employment increased at a faster pace while the pace of price inflation reduced.  IBD data revealed consumer confidence had picked up again underpinning growth hopes and Emerging market woes fed into US Dollar strength.


Emerging market problems supported the Dollar with the Euro retreating to 1.1535 mark. Combined with Dollar demand on the first day of trading since Monday’s Labour Day it was a tough day for the Euro yesterday. Italian bonds continued to find support after positive comments from Lega officials on EU budget rules and there was late respite for the currency in the form of a narrowing of the German/Italian yield spread.

Economic data from the EU came in the form of Producer Price Index numbers which were above consensus, up 4% YoY. EU Markit Services PMI figures and retail sales numbers dominate the data today, with the final piece of interesting data being the ECB’s Praet speech.

Data to watch:

08:15    SPA Markit Services PMI (Aug)

08:55    GER Markit Services PMI (Aug)

08:55    GER Markit PMI Composite (Aug)

09:00    EUR Markit Services PMI (Aug)

09:00    EUR Markit PMI Composite (Aug)

09:30    GBP Markit Services PMI (Aug)

10:00    EUR Retail Sales MoM (Jul)

10:00    EUR Retail Sales YoY (Jul)

10:30    EUR ECB’s Praet Speech


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