Pound Stumbles as UK Manufacturing Contraction Continues

Signs of Chinese Manufacturing Resilience Benefit Australian Dollar

While confidence in the prospect of an imminent US-China trade agreement faded this failed to keep the Australian Dollar down ahead of the weekend. Signs of greater resilience within the Chinese manufacturing sector helped to encourage a general sense of market risk appetite, shoring up the commodity-correlated Australian Dollar. Although the third quarter Australian producer price index fell short of forecast this was not enough to knock AUD exchange rates.

Signs of an uptick in domestic retail sales could see the Australian Dollar pushing higher across the board.

Manufacturing Improvement Unable to Sustain Pound Boost

A better-than-expected UK manufacturing PMI only offered the Pound a temporary boost against its rivals on Friday. Although the headline index picked up from 48.3 to 49.6 in October, reaching a six-month high, this still signalled weakness within the manufacturing sector. With the sector failing to climb out of contraction territory worries over the strength of the third quarter gross domestic product persisted, limiting the appeal of the Pound.

A similarly underwhelming performance from the construction sector could leave GBP exchange rates on the back foot this evening.

Euro Struggles amid Lack of Confidence in Eurozone Outlook

The mood towards the Euro proved largely muted in the absence of any fresh domestic data releases. With markets still seeing little cause for confidence in the economic outlook of the Eurozone support for the single currency remained limited. While the US Dollar came under renewed pressure this was not enough to give EUR exchange rates any particular boost.

Any weakening of the Eurozone Sentix investor confidence index could see the Euro fall out of favour with investors once again.

US Dollar Slides in Spite of Better-than-Expected Payrolls

Although October’s change in non-farm payrolls figure showed an increase of 128,000 rather than the forecast 89,000 the US Dollar remained on a weaker footing. This stronger showing was not enough to prevent the accompanying unemployment rate from picking up to 3.6%, suggesting that the labour market is struggling to tighten further. With the ISM manufacturing index also pointing towards another month of slowing growth USD exchange rates were left to slip lower.

With tonight’s factory orders data expected to show another month of decline the US Dollar looks vulnerable to further selling pressure.

Manufacturing PMI Uptick Fails to Lift Canadian Dollar

The Canadian Dollar shook off a modest uptick in October’s manufacturing PMI, continuing to trend lower against many of the majors. While the reading of 51.2 indicates steady manufacturing growth on the month investors maintained a generally cautious view of the Canadian outlook. Even an improvement in oil prices was unable to encourage any CAD exchange rate gains.

As long as markets see reason to worry over the underlying strength of the Canadian economy the potential for a Canadian Dollar rally looks limited.

Upbeat Consumer Sentiment Supports New Zealand Dollar

As October’s ANZ consumer confidence index jumped 4% on the month this encouraged NZD exchange rates to gain fresh ground. Although domestic business sentiment remains muted this improvement in consumer outlook could help to shore up economic activity in the short term. With support for the US Dollar fading the risk-sensitive New Zealand Dollar found additional support.

However, demand for the New Zealand Dollar could easily fade if the latest Treasury economic indicators highlight persistent signs of a slowdown.

Data Releases

November 4th 10:30 AUD Retail Sales ex Inflation (QoQ) (3Q) 0.3%
November 4th 11:00 NZD Treasury Publishes Monthly Economic Indicators
November 4th 19:30 EUR Eurozone Sentix Investor Confidence (NOV)
November 4th 19:30 GBP Construction PMI (OCT) 44
November 4th 01:00 USD Factory Orders (SEP) -0.3%

Louisa Heath