Market Drivers October 24, 2016
EZ PMI beat across the board
UK CBI -17 vs. -4
Nikkei 0.29% Dax 0.78%
Europe and Asia:
EUR PMI 53.7 vs. 52.8
GBP UK CBI Industrial Trends
CAD Wholesale Sales 8:30
After hitting fresh multi-month lows at the start of week’s trade, the euro rallied on the back of better than expected PMI reading rising to towards the 1.0900 figure in morning European trade.
The EZ PMI came in at 53.7 vs. 52.8 on a composite basis with both PMI Services and PMI Manufacturing beating their marks. The only dour note across all the data was the slight slip in French Services PMI to 52.1 from 53.0 but all the indices remained comfortably above the 50 boom/bust level suggesting that growth in the region continues at a steady pace.
Markit survey analysts noted that, ”With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year.
Not only are average charges increasing at the steepest rate for just over five years, but October also saw the extent of manufacturing supply chain delays hit one of the highest in five years. Increasingly widespread delays suggest demand is outstripping supply for many goods, something which is usually soon followed by rising prices and investment in additional capacity.”
The news should provide a measure of solace for the ECB which has been battling both slow growth and deflation pressures all year long and shows that the central bank’s QE policy may starting to have the intended impact as demand picks up.
Flash PMIs are the absolute latest measure of economic performance in the region and to that end suggests that the IFO report which comes out tomorrow could also beat forecasts. Positive economic news this week could spur a short covering rally in the pair, but any upside move is now likely to be capped by the 1.1000 level as sellers appear to be firmly in control for now with monetary policy divergence still the dominant theme driving the trade.
In North America today the calendar is quiet with only the Canadian wholesale prices on tap. The market is likely to remain in tight ranges for the rest of the day, as traders digest the price action from last week and prepare for the UK and US GDP data releases which could both set the tone for trading this week.