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No let up to volatility roller coaster

No let up to volatility roller coaster

The UK PMI Manufacturing Index was slightly weaker than expected at 54.3 from an upwardly-revised 55.5 the previous month. However, there was a further solid expansion in orders which will continue to support short-term growth prospects.

Construction PMI this morning is expected to drop from September’s figure. Should the PMI reading come in better than predicted, we could see GBPUSD rebounding above the 1.2300 level. However, the reaction to the data may be short-lived as the main driver for the Pound remains the Fed rate decision due at 6pm tonight.

The Dollar lost momentum across the board yesterday as an ABC poll showed Trump taking the lead in the Presidential race. The Institute for Supply Management (ISM) Prices Paid data arrived 1.5 points above its previous high and 0.5 points above consensus. The ISM Manufacturing results also came in above its previous score by 0.4 points and above consensus by 0.2 points.

Tonight’s Fed rate decision will be the markets’ main price driver. In the event that rates are held, anything other than strongly hawkish rhetoric on a December hike will cause a USD selloff.

The Euro strengthened sharply by around 0.8% from opening to midday due to a significant underlying deterioration in risk appetite. Trump’s lead in the ABC poll meant that the Euro benefitted from safe-haven related trades from USD to EUR. The EU Markit Manufacturing data and German unemployment figures are the only Euro-centric data releases today.

Data to watch: 8.55am German Markit Manufacturing PMI (Oct), Unemployment Change, Unemployment rate. 9am EUR Markit Manufacturing PMI (Oct). 9.30am UK PMI Construction. 12.15pm ADP Employment Change. 6pm Fed’s Interest Rate Decision & Monetary Policy Decision.

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