Euro Services activity in the spotlight
UK October PMI Services sector index strengthened to 55.6 from 53.6 previously, beating forecasts in producing the strongest reading for five months. Overall business confidence in the outlook was still subdued and employment growth slowed to a seven-month low, although output prices rose at the fastest pace for six months with upward pressure on salaries.
The data aided Sterling sentiment, as did some corrective moves after sharp losses on Thursday, with a suspicion that the Pound had been oversold. Sterling found support below 1.3050 against the Dollar, with only limited net gains while GBPEUR was unable to hold above 1.1235.
Bank of England’s (BoE) Mark Carney, while talking to ITV, said Britain’s economy would take a hit if there is no Brexit deal. Significantly, he added that the Bank may not be able to cut rates in the event of a bad Brexit deal due to high inflationary pressure.
Brexit talks are due to resume this week and positive rhetoric could underpin Sterling, especially with low expectations of a breakthrough with markets also monitoring corporate investment plans closely as Sterling held little changed in the morning session.
US economic headlines were grabbed by US non-farm payrolls, which rose 261,000 for October after a revised increase of 18,000 for September. Employment rebounded strongly following the hurricane-related dip last month, although consensus forecasts were for an increase of over 300,000. Unemployment declined to a fresh 16-year low of 4.1%, although the household survey reported a decline in the number of people employed. Average earnings were unchanged for the month which cut annual growth to 2.4% from a revised 2.8%.
The data as a whole didn’t have a significant impact on expectations for a December rate hike, although subdued earnings data could have an impact on 2018 monetary policy expectations. Uncertainty will be a key element of 2018 policy, especially with the nomination of new Federal Reserve (Fed) Chair, with markets also looking for any hints as who would be appointed as Vice-chair.
The economic calendar is light today with only Federal Open Market Committee member Dudley speaking later today.
The Euro ended last week at 1.1250 against the Pound, having fallen from above 1.1400. Against the Dollar, it was a very unpredictable trading week as lows of 1.1599 were seen versus highs of 1.1682.
Following recent highs in European equity markets, investors await today’s PMI Services and Composite surveys and Sentix investor confidence index. With a strong manufacturing survey last week indicating positive movement in the region, coupled with improvements in the global economic environment, today’s data is expected to continue the vein of form.
Data To Watch:
08:55 EUR Markit Services PMI (Oct) – Germany
08:55 EUR Markit PMI Composite (Oct) – Germany
09:00 EUR Markit Services PMI (Oct)
09:00 EUR Markit PMI Composite (Oct)
10:00 EUR Producer Price Index (YoY) (Sep)