Sterling Unable To Compete With The Dollar
We saw better than expected Manufacturing PMI from the UK which saw Sterling strengthen against Euro and various other currencies. This strength was not reciprocated against the Dollar as the market is still pricing in the stronger outlook for the US economy. This morning we are looking at UK Construction PMI to see if the strong sector continues. The housing market typically slows down towards the end of the year and we could also be seeing house prices peaking, and demand for loans decreasing.
All seems to be rosy in the US garden as the US Treasury Department have announced that borrowing for Q4 will be the lowest for that period since 2007. As the economy steadily improves, tax receipts increase and as a result we see the US budget deficit continue to fall as it has done since 2009. It is currently at 2.8% of GDP compared to the 9.8% level when Obama came to power in 2009.
Overnight, the focus was on Australia and the interest rate decision from the RBA. As expected, rates were kept on hold which was no surprise given the weakness of the economy and house prices are rising rapidly as well. Retail sales rose to a 20 month high, and exports and imports both improved although not overly significantly. The Australian Dollar is seen as being overvalued which isn’t great news for an export based economy.
The main reports out today are PMI construction from the UK, the European Commission’s Economic Growth Forecasts, US Trade Balance and Factory Orders and the unemployment rate from New Zealand.