UK waits on economic-support measures
The September flash PMI data for the manufacturing sector retreated to 54.3 from 55.2 while there was a steeper decline in the services sector to 55.1 from 58.8 while overall business confidence declined to a 4-month low amid underlying reservations over the impact of coronavirus reservations. Employment also continued to decline for the month, although the rate of job losses did slow.
Chancellor Sunak will today announce economic-support measures and an extension of loan guarantees and it was also announced that there will be no budget statement this year. Chancellor Sunak is also expected to provide wage-support measures to cushion the impact of ending the furlough scheme and provide some wider support. These expectations provided an element of Sterling support and there were also some tentative hopes surrounding the possibility of progress in Brexit talks.
Sterling recovered from monthly lows below 1.2700 against the Dollar and the 1.0850 against the Euro before stabilising.
The US manufacturing PMI index increased slightly to 53.5 from 53.1 and slightly above consensus forecasts while the services-sector index edged lower to 54.6 from 55.0 previously and in line with expectations. Rhetoric from Federal Reserve (Fed) Chair Powell was little changed from yesterday..
Fed vice-chair Clarida stated that the central bank is not even thinking of raising interest rates until actual inflation is at 2%. Any judgement on any inflation overshoot will be made closer to the time. He reiterated that inflation needed to spend some time with inflation above 2% to offset time spent below this level.
The comments from Chicago head Evans were more dovish than on Tuesday as he commented that inflation should be at 2.5% for some time if the Fed is doing its job right. The US currency was resilient despite the relatively dovish Fed comments.
The September German PMI manufacturing index strengthened to 56.6 from 52.2 and above consensus forecasts of 52.5, but the services-sector index declined to 49.1 from 52.5 previously and below expectations. There was a similar pattern for the Euro-zone as a whole with the manufacturing index at 53.7 from 51.7 while the services-sector index retreated sharply to 47.6 from 50.5. The data reinforced market concerns that a renewed increase in coronavirus cases was undermining activity in the services sector.
There was a wider dip in confidence over the outlook, especially with further restrictions coming into force. Overall, Euro sentiment remained fragile.
As of writing, the Euro is currently trading just below the 1.1650 against the Dollar.
Data to watch
13:30 – USD – Unemployment Claims
15:00 – GBP – BOE Gov Bailey Speaks
15:00 – USD – Fed Chair Powell Testifies
15:00 – USD – Treasury Sec Mnuchin Speaks