Manufacturing, Fed to Drive Markets Ahead of BoE

Sterling rallied above 1.14 against the euro yesterday ahead of key decisions this week. Manufacturing data and the Fed are in focus today.

Previous Day's Market Highlights

The pound held gains yesterday as investors awaited Thursday’s Bank of England meeting. Sterling-euro broke 1.1400 for the first time since the end of September. Sterling-dollar pushed higher above 1.3250. The pound is trading at five-month highs against the Australian dollar, four-month highs against the Canadian dollar, and a new 16-month high against the New Zealand dollar.  
 
Euro-dollar continued to hold above 1.1600, above last week’s low around 1.1575. Releases of note included a slowdown in Eurozone CPI to 1.4% and above-forecast GDP; the mixed releases had a limited impact on the euro.  
 
A contraction in economic growth in Canada weighed on the loonie. Above-forecast employment data, including a drop in the Unemployment Rate to 4.6% from 4.8%, saw the kiwi dollar strengthen overnight, recovering from the rate’s highs above 1.9400.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1421 1.1424 1.1069 3.11%
GBP / USD 1.3308 1.3339 1.3027 2.34%
EUR / USD 1.1652 1.1880 1.1574 2.58%
GBP/AUD 1.7334 1.7368 1.6675 3.99%
GBP / NZD 1.9227 1.9433 1.8367 5.49%
GBP / CAD 1.7158 1.7161 1.6350 4.73%

Today's Market Highlights

This morning kicked off with UK Manufacturing PMI, which surprised to the upside and is further supporting the pound ahead of tomorrow's BoE meeting. Markets will also keep an eye on comments from MPC Member Cunliffe (10:00 GMT), who has recently struck a more cautious tone. 
 
In the afternoon, Canada and the US release Manufacturing PMI data (13:30, 14:00 GMT). Declines in the US ISM index could weigh on the dollar, although attention will primarily be on this evening’s Fed decision (16:00 GMT). The Fed is expected to keep rates on hold at 1.25% and signal a third rate hike remains on the cards. Updated guidance on inflation and 2018 expectations will be key.  
 
Anticipation of a potential BoE rate hike tomorrow is high and may continue to support the pound. Markets are pricing in nearly a 90% chance of a hike. However, economists have been more divided over whether a move now would be too soon, and the greater risk for the pound may be to the downside should the Bank decide to hold steady.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Markit Manufacturing PMI (Oct) 55.8 55.9
10:00 GBP MPC Member Cunliffe Speaks
12:15 USD ADP Employment Change (Oct) 200K 135K
13:30 CAD Markit Manufacturing PMI (Oct) 55
13:45 USD Markit Manufacturing PMI (Oct) 54.5 54.5
14:00 USD ISM Manufacturing PMI (Oct) 59.5 60.8
14:30 USD EIA Crude Oil Inventories (27 Oct) -2.575M 0.856M
18:00 USD Fed's Interest Rate Decision 1.25% 1.25%
18:00 USD Fed's Monetary Policy Statement
20:15 CAD BoC Governor Poloz Speaks
00:30 AUD Trade Balance (Sep) 1,200M 989M