Intraday Market Thoughts

GBP Nears Lows Despite PMI Rise, ISM Next

by Patrik Urban
Oct 3, 2011 12:13

Swiss retail sales and PMI disappoint; Eurozone PMI revised higher but still confirm sector contraction; UK PMI better than expected. Market turns to US ISM manufacturing due at 10:00 am. Ashraf's Premium Insights due in 60 mins.

Throughout the London session, USD was consolidating gains it made during Asian trading. As risk aversion lingers, JPY continues to be the only major currency that outperforms the greenback. Gold and silver push higher and have recovered a part of last week's losses. Gold trades around 1660 and silver around 31.

Data from Switzerland disappointed again when annualized Swiss Retail sales dropped -1.9% in August from +2.9% in July and SVME PMI fell to 48.2 from 51.7. Manufacturing sector contracted for the first time in more than two years.

Final Eurozone Manufacturing PMI slipped to 48.5 from 49 in August, the worst since 8/2009 but still better than the initial estimate of 48.4. German final Manufacturing PMI printed 50.3 from 50.9 in August and also came out ahead of the flash estimate. Despite these revisions, m/m readings show declining figures and point to further weakness.

September UK Manufacturing PMI beat expectations at 51.1, from Augusts upwardly revised 49.4. Immediately after the release, GBP lost about 50 points but it recovered them within seconds suggesting a "fat finger" error. Today's above 50 reading, which implies a sector expansion, may indicate that calls for an increase in the Asset Purchase Facility may be unanswered on Thursday. At the same time, New Export Orders sub index fell to 26 months low confirming economic woes.

Today's meeting of Eurozone finance ministers will deal with the issue of leveraging ESFS while the next meeting scheduled at the end of October should determine whether Greece will receive the next part of the aid. News that EFSF will be increased/leveraged substantially may help to improve risk sentiment and temporarily lift the Euro.

The US session will bring ISM Manufacturing for September that is seen slightly lower at 50.5 from previous 50.6 and ISM Prices Paid index that is expected at 54 from 55.5. Construction spending in August should come at -0.2% from -1.3%. All data releases are due at 10:00 am ET.


Latest IMTs