Carney to sign contract extension?
The US Dollar was kept quiet when compared to most of its major trading partners particularly due to the Labor Day holiday. The Greenback still gained an element of support from vulnerabilities within emerging markets with overall tensions surrounding trade policies also an important factor providing net support.
With the activity in US markets slowly returning to normalcy after the holiday yesterday, the ISM manufacturing for the month of August will be the only major event later in the NA session, seconded by the IBD/TIPP index and the speech by Chicago Fed C.Evans.
The UK had a poor showing on the data front yesterday which in turn had a significant impact in undermining Sterling sentiment, especially given wider economic doubts.
The UK August PMI manufacturing index declined to 52.8 from a revised 53.8 the previous month which was below consensus expectations of an unchanged reading and the lowest figure for 25 months. There was also a slowdown in orders growth, primarily due to the impact of the decline in export orders since April 2016. Job creation slowed sharply and overall business optimism declined to a 22-month low, although companies still expected output to strengthen over the next 12 months.
There was further speculation that Bank of England (BOE) Governor Carney might extend his term further to 2020, although a government spokesman stated that he was still expected to step down in 2019.
The UK construction PMI for August is due for release today at 9:30am, with the figure expected to come in at 55.0, down from July’s 55.8 reading. Meanwhile, the BOE inflation report hearings, due at 1:15pm, will also gather a lot of attention, especially the Governor Carney’s testimony.
Geopolitical factors took centre stage yesterday, with economic data seeming to have little effect on the market. In Italy an argument is brewing over the budget, with Economy Minister Tria trying to keep the 2019 budget deficit below 2% while the Lega and 5-Star parties want a wider deficit to enable increased spending.
The Italian index declined to a 2 year low, meaning the weak growth outlook increased the likelihood of recession, increased the likelihood of less tax revenue and therefore compounded the dilemma over the Italian budget.
Eurozone PMI data was largely unchanged, but the Turkish Lira traded weaker than expected hindering the Euro early on. Later in the session a rally in Italian bonds pushed the Euro to 1.1610 against the Dollar which proved to be the high. Data today includes the Swiss CPI index, UK construction data and most significantly the UK’s Inflation Report Hearings at 13.15.
Data to watch:
07:15 CHF Consumer Price Index (YoY) (Aug)
08:30 GBP PMI Construction (Aug)
13:30 CAD Markit Manufacturing PMI (Aug)
14:00 USD ISM Manufacturing PMI (Aug)
14:00 USD ISM Prices Paid (Aug)