AUD Building approvals rebound 6.1%
CHF SVME PMI tepid
GBP PMI Manufacturing slips to 53.7
US ADP, ISM Manufacturing on tap
For the second day in a row, the Asian and early European sessions found the majors merely marking time and consolidating yesterdays material gains against the greenback. Nevertheless, economic data out of Europe was extremely light, and traders are gearing up for three rounds of market moving data this week: US ISM Manufacturing today, the ECB rate decision tomorrow, and US NFPs and ISM Non-Manufacturing on Friday. Given the dismal Chicago PMI reading earlier this week, dollar bulls may opt out of trading today in order to avoid a potentially dreary ISM result. Although the ECB is expected to wait until December to hike rates to 3.50%, hawkish rhetoric and ECB President Jean-Claude Trichets favorite keyword vigilance should help to support the recent euro strength. However, the major dollar focus this week lies in the hands of NFPs. As we mentioned on Monday, Presently the market is handicapping a gain of 125K versus the paltry 51K print from the month prior. Furthermore, traders will want to see an upward revision of September data in order to be convinced of the bounce back scenario. Given the decidedly poor data so far, the chances of an upside surprise in the NFP appear to be slim. However, NFPs are notoriously unpredictable and we have long ago stopped trying to forecast them.
Cable proved to be resilient today despite tepid economic data, as GBP/USD edged up to the 1.9100 level before easing slightly. Hawkish comments made late yesterday by Bank of England Governor Mervyn King likely made an impact, as Mr. King noted that inflation is a little bit above target and there doesnt seem to be a great deal of spare capacity. Meanwhile, UK Manufacturing PMI slipped to 53.7 and a breakdown of the data showed that overall new orders fell marginally, while export orders rose from September, subsequently quelling fears that a slowdown in the US may seriously impact export growth in the UK. Furthermore, output prices gained while input prices fell for a third consecutive month as manufacturers passed on cost increases that they incurred in previous months, which highlights the BOEs concerns regarding second round effects on inflation. Mounting evidence that price pressures are alive and well have led market expectations to widely shift to a BOE rate hike next week to 5.00%.
In other economic news, Swiss SVME PMI slipped lower than expected to 62.3 from 64.4 in the month prior. However, Swissie shook off the report as the Swiss National Bank has made it crystal clear that they expect a slowdown from the torrid growth rates seen earlier this year. Additionally, the purchase price index gained to a reading of 74.5 from 72.6, underpinning the case for a continuation of rate normalization by the SNB in December to 2.00%.
As we mentioned above, the US is set to release ISM Manufacturing data, but the ADP employment change is on tap as well. Traders will be eagerly scrutinizing both reports in an attempt to handicap Fridays NFP figure. Additionally, markets will be checking ISM Prices Paid, which are expected to ease back. While this will be of great comfort to the US Fed, dollar longs could find themselves feeling the agony of defeat once again today.
