GBP/USD Hits Two-Week Lows

GBP/USD hit two-week lows Friday as the GBP softened and the USD gained. Manufacturing PMIs from the UK, Canada, and the US are in focus today.

Previous Day's Market Highlights

The dollar made further gains following last week’s Fed rate hike and positive economic data. This pushed sterling-dollar to 1.30 for the first time since 12 September; the rate hit support and recovered around half a cent. Euro-dollar dropped below 1.1580 but later recovered 1.16. Renewed Brexit concerns and mixed final GDP estimates—unchanged quarterly growth at 0.4% and slightly lower annual growth at 1.2%--also put pressure on the pound.
 
Elsewhere, sterling continued to trade within the 1.12-1.13 band against the euro, tested 1.80 against the Aussie, and fell below 1.70 against the kiwi and 1.69 against the Canadian dollar. As markets opened on Sunday evening, the Canadian dollar gained on news that the US and Canada had reached a new NAFTA deal. This saw sterling-CAD back below 1.68 to its lowest levels since 29 August. The Mexican peso also strengthened on the new NAFTA deal.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1252 1.1302 1.1047 2.26%
GBP/USD 1.3031 1.3298 1.2785 3.86%
EUR/USD 1.1580 1.1815 1.1526 2.45%
GBP/AUD 1.8068 1.8401 1.7781 3.37%
GBP/NZD 1.9721 2.0031 1.9435 2.98%
GBP/CAD 1.6731 1.7190 1.6796 2.29%

Today's Market Highlights

As we kick off the new month, UK data will continue to steal some of the spotlight from Brexit headlines, at least this morning (09:30 BST). Manufacturing PMI is forecast to have slipped to 52.5, which would be its third consecutive softer reading. While a reading above 50 is consistent with industry expansion, the index has fallen almost every month since November, when it peaked at 58.2. A lower reading here could weaken the pound.
 
Manufacturing PMI releases continue in the afternoon session, with the latest figures from Canada and the US. Softer readings in both Canada and the US could equate to some currency weakness, but at least on the US dollar side this may be partially off-set if the index holds above 60 as forecast—well clear of the key 50 mark. Markets will also keep an eye on any headlines on US-China trade, on Italy’s budget, or from the UK’s Conservative party conference.
 
Looking further ahead, PMI releases continue with the UK’s Construction index out tomorrow and Services index out Wednesday, alongside Services figures from the Eurozone and the US as well. Fed Chair Powell speaks on Wednesday and on Friday the US releases its September jobs report, including NonFarm Payrolls and Average Hourly Earnings figures. Later in the month, attention will be increasingly on Brexit as the EU summit nears and EU leaders discuss Brexit progress made thus far. October had been previously touted as the preferred deal deadline but now most hopes are for a deal to be reached at an additional November summit.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Markit Manufacturing PMI (Sep) 52.5 52.8
9:30am GBP Mortgage Approvals (Aug) 64.500K 64.768K
10:00am EUR Unemployment Rate (Aug) 8.1% 8.2%
2:00pm USD Fed's Bostic Speaks
2:30pm CAD Markit Manufacturing PMI (Sep) 56.6 56.8
2:45pm USD Markit Manufacturing PMI (Sep) 55.4 55.6
3:00pm USD ISM Manufacturing PMI (Sep) 60.3 61.3
5:15pm USD Fed's Rosengren Speaks
6:00pm CAD BoC's Lane Speaks
10:00pm NZD NZIER Business Confidence QoQ (Q3) -20%
5:30am AUD RBA Interest Rate Decision 1.5% 1.5%
5:30am AUD RBA Rate Statement

Caxton