123

Daily Market Commentary

construction-1-1193849

The USD

We talked yesterday about manufacturing. Examining the data from those that make purchasing orders for manufacturing firms in the States was somewhat of a mixed bag. With two different groups measuring the figures in different ways….and arriving at a different figure. Overall, the interpretation was that the States showed a contraction of future orders for the sector. And elsewhere the tale was not dissimilar.

Individual people were assessed to have spent less. Even the 3 and 6 month bond prices have shown an increase over the last month. This can be interpreted as showing a slight increase in the way investors view the safety of their funds. As the price rises, it can be said they are demanding more for lending the US their money – given the bond is a type of IOU from the country offering them.

So what happened to the USD? Well, during the course of the day we saw a concerted push from the Pound against the Dollar meaning that from a market open in the late 1.4200s we were able to achieve almost 1.4450 at some stages during the day.

The data due today for the US is not as focused on as perhaps yesterday’s information, and pending macro factors, we might expect far less movement in the Dollar.

The EUR

The Eurozone today expects to produce two fairly high tier data sets in their Unemployment Rate, which is forecast to remain steady at 10.5%. This is high when compared to the UK and US figures. And then also, their Producer Price Index – what on Earth is this and why would it be important? The PPI is a measure of the change in value (or the price they get) of domestic producers of commodities in all stages of their production). So this includes the early stages of production, through to intermediate and then the finished article. It’s important as it shows what is known as ‘price pressure’.

Price pressure is a strong indicator of how much purchasing or economic activity is taking place. As more people can and do buy things, the prices charged by producers in the economy will rise to meet demand. We expect that producers will pass on rises in their input prices to consumers, and so we get an overall inflationary picture.

And when inflation is high….we can interpret this as a need to cool it with tools such  as interest rate rises.

Though, this is a long, long way off for the European Central Bank (and a really simplistic view!)

The GBP

The figures we discussed yesterday for the UK surprised positively with both the pace of growth in manufacturing and the number of mortgages approved improving better than was forecast. Again the result against the Euro and Dollar was a surge that lasted for most of the day.

The construction sector purchasing managers index is due today – the same figure as yesterday, just a different sector. Any figure released over 50 is an indicator of growth. 60, for example is a lovely robust figure and the expectation here is 57.6 so high hopes for this sector. Normally, it’s tempting to view a high figure as having more risk of disappointment. But the figure has performed well of late.