Currency markets were relatively quiet ahead of key events this week – central bank decisions from the Bank of England and Reserve Bank of Australia as well as the release of the all-important US nonfarm payrolls report.
Movement in the major currencies was rather limited in today’s European session, with the exception of the pound which got a lift from UK manufacturing PMI data. There was an unexpected bounce in manufacturing activity in October with PMI rising to 55.5 last month from an upwardly revised 51.8 in September. This was the highest reading in the index since mid-2014 and beat estimates for a reading of 51.4, which was well above estimates of 51.4. The upbeat data comes days before the Bank of England holds a policy meeting. While the Bank is expected to keep policy unchanged, investors will look for any signals as to when it will raise rates.
Sterling surged against the dollar after the PMI data to a one week high of 1.5496, moving off the day’s low of 1.5422.
Other manufacturing PMI data released today came from the Eurozone, with the final reading for the region printing a better-than-expected number. The index for October was revised higher to 52.3 from 52.0 in the flash reading. Despite the higher PMI number, the euro was only able to reach a high of 1.1051 versus the dollar. There is likely to be little chance of the euro recovering significantly due to the policy divergence between the ECB and the Fed.
From the US, the ISM manufacturing beat forecasts to rise to 50.1 in October from a 50.0 expected and lower than the prior 50.2. However the data will not likely change any views the Fed may have regarding monetary policy or the chance of a December rate hike.
The dollar initially moved higher against the yen after the ISM data to 120.62 yen before falling back to pre-data levels around 120.56. The most important risk for the dollar will be Friday’s nonfarm payrolls report. Investors look towards this jobs data for clues on the US rate policy outlook.
Coming up early on Tuesday, focus will be on the RBA’s policy decision. The aussie was relatively flat against the greenback today, mostly trading a range between 0.7127 and 0.7152 after rising early in Asia in reaction to Chinese manufacturing PMI data which showed the Caixin index rose to 48.3 in October from September’s 47.2.