Monthly Archives: October 2023

Following the release of a significant upgrade to the UK’s PMIs for September, there was a little, though noticeable, increase in the value of the Pound relative to the Euro and the Dollar, which signals the economy did better than previously believed.

The S&P Global Services PMI for September was revised upward to 49.3 from 47.2 in the preliminary estimate, suggesting that the economy avoided a significant decline and instead remained stable from its reading of 49.5 in August.

The public release of the initial estimate indicated a sharp slowdown, which was later attributed to an extension of the Pound’s multi-week slide at the time. Therefore, Wednesday’s positive surprise can be viewed as supportive of the currency.

Markets are still unsure if the Fed will raise interest rates again, and recent statements from Fed policymakers imply that the rate-setting committee is split on whether to act. Today’s talks are likely to highlight those contrasts, as Bowman will likely favour a walk while Goolsbee would warn against it. Sunak will speak at the Conservative Party conference today.

The British Pound is projected to struggle versus the Euro in October as the fallout from a difficult September persists, but weakness will be limited given that the Eurozone and UK economies are unlikely to change direction.

The Euro and Dollar have both fallen heavily against the Dollar in the August-September period, due to ongoing US economic outperformance, leaving both at jeopardy of extending their losses against the Dollar and underlining the relevance of the matter of economic divergence for the FX market.

The US manufacturing ISM remained in contraction mode in September, but it printed ahead of expectations. It increased to 49.0 (vs. 47.8 forecast) its highest level since November of last year. In the meantime, the Eurozone unemployment rate fell to 6.4% in August.

On the currency front, the dollar was firmly in the lead. The mediocre tone in risk appetite and the Fed’s hawkish rhetoric strengthened the greenback.

Today’s major release will be August job vacancies statistics in the United States. The number of open positions is expected to fall slightly. Lane’s comments as ECB Chief Economist will also be of interest.

Currency markets have begun the week with new data showing that the UK housing market has weakened.

Average UK house prices fell by 5.3 percent in the year to September, the latest report from Nationwide has revealed. On a monthly basis, prices were flat in September.

Later in the morning we have the PMI Manufacturing data for France, Germany, the UK and the EU as a whole.

Markets will pay close attention to these figures for September as the figures have been below the 50 level for some time. In the UK, the earlier ‘flash’ report showed that the manufacturing PMI was below the 50 level for a 14^th consecutive month. The September reading was the second worst since mid-2020, and it is expected the final reading to show a largely unchanged print.

Looking at the week ahead, GBP is likely to remain vulnerable against the Euro in a week that is very quiet in terms of UK data. Pressure remains on the Pound after the last Bank of England policy announcement where rates were left on hold.

Finally, the US government has avoided a federal shutdown after both House & Senate agreed on a short-term funding deal.

A bill ensuring funding until 17^th November received overwhelming support and was signed into law by the US president before a deadline.

Now that the shutdown has been avoided, this week’s key data release – the nonfarms payroll report for September will be closely monitored. The report will certainly be a key input into the Feds decision around whether to raise interest rates in November after September’s pause.