Talking Points:
British Pound May Broadly Overlook October’s Final Batch of PMI Figures
US Dollar Could Find Strength if ADP Figures Set a Positive Tone for NFP
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Another quiet day on the European economic data front will see October’s UK Services PMIreading in the spotlight, withsector growth is expected to slow for a second consecutive month. The economy-wide Composite PMI will distill the range of sector-specific readings published over recent days to show that the overall pace activity expansion slowed to the weakest since June 2013 last month. The outcome’s implications for the British Pound may prove limited however considering the release’s limited ability to drive BOE policy expectations.
The hawks on the rate-setting MPC committee will almost certainly fail to muster a voting majority in favor of tightening at this week’s meeting even as their presence reinforces a bias toward hikes following the current standstill (whenever it ultimately ends). In this environment, softer data is likely to be seen delaying normalization rather than fostering easing expectations. The markets have been busy trimming near-term rate hike expectations since July, meaning this narrative could be getting close to being priced in thereby no longer a driver of big-splash volatility. Indeed, futures markets suggest the priced-in timeline foreseeing the first increase in the benchmark lending rate by mid-2015 has been solidifying for the past three weeks.
Looking ahead, the spotlight will shift to the US, where traders’ focus will be on October’s ADP Employment report as well as the ISM Non-Manufacturing Composite reading. The former is expected to show private-sector job creation accelerated last month, with firms adding 220,000 to payrolls compared with a 213,000 increase in September. The latter is seen revealing a slight slowdown in the rate of service-sector activity growth, marking a second month of moderation following a nine-year peak in August.
Despite its spotty record at forecasting the much-anticipated official jobs data due on Friday, the ADP figure still seems to command some attention. An upbeat outcome may reinforce other survey data suggesting labor markets did not deteriorate last month as consensus forecasts for Nonfarm Payrolls anticipate, which could offer a boost to the US Dollar amid a re-pricing of the Fed rate hike outlook to favor action sooner rather than later. Meanwhile, as we argued in our weekly forecast, a modest pullback on the ISM print ought not significantly hurt the greenback considering the FOMC’s demonstrated willingness to look past near-term business cycle swings in setting the policy trajectory.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
21:45
NZD
Unemployment Rate (3Q)
5.40%
5.5%
5.6%
21:45
NZD
Employment Change (YoY) (3Q)
3.2%
3.0%
3.7%
21:45
NZD
Employment Change (QoQ) (3Q)
0.8%
0.6%
0.4%
21:45
NZD
Labor Cost Private Sector (QoQ) (3Q)
0.5%
0.5%
0.6%
21:45
NZD
Private Wages ex Overtime (QoQ) (3Q)
0.5%
0.5%
0.6%
21:45
NZD
Participation Rate (QoQ) (3Q)
69.0%
69.0%
68.9%
21:45
NZD
Average Hourly Earnings (QoQ) (3Q)
1.4%
1.1%
0.5%
22:30
AUD
AiG Performance of Service Index (OCT)
43.6
–
45.4
23:50
JPY
Monetary Base (YoY) (OCT)
36.9%
–
35.3%
23:50
JPY
Monetary Base – End of Period (OCT)
¥259.5T
–
¥252.6T
0:01
GBP
BRC Shop Price Index (YoY) (OCT)
-1.9%
-1.7%
-1.8%
1:30
JPY
Labor Cash Earnings (YoY) (SEP)
0.8%
0.8%
0.9%
1:45
CNY
HSBC China Services PMI (OCT)
52.9
53.5
1:45
CNY
HSBC China Composite PMI (OCT)
51.7
52.3
2:30
JPY
BOJ Governor Kuroda Speaks in Tokyo
–
–
–
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
8:15
CHF
Consumer Price Index (YoY) (OCT)
-0.1%
-0.1%
Medium
8:15
CHF
Consumer Price Index (MoM) (OCT)
-0.1%
0.1%
Medium
8:15
CHF
CPI EU Harmonized (YoY) (OCT)
0.0%
0.0%
Low
8:15
CHF
CPI EU Harmonized (MoM) (OCT)
0.0%
0.4%
Low
8:45
EUR
Markit/ADACI Italy Composite PMI (OCT)
–
49.5
Low
8:45
EUR
Markit/ADACI Italy Services PMI (OCT)
49.4
48.8
Low
8:50
EUR
Markit France Composite PMI (OCT F)
48.0
48
Low
8:50
EUR
Markit France Services PMI (OCT F)
48.1
48.1
Low
8:55
EUR
Markit Germany Services PMI (OCT F)
54.8
54.8
Low
8:55
EUR
Markit/BME Germany Composite PMI (OCT F)
54.3
54.3
Low
9:00
EUR
Markit Eurozone Composite PMI (OCT F)
52.2
52.2
Low
9:00
EUR
Markit Eurozone Services PMI (OCT F)
52.4
52.4
Low
9:30
GBP
Official Reserves (Changes) (OCT)
–
-$1640M
Low
9:30
GBP
Markit/CIPS UK Composite PMI (OCT)
57.0
57.4
Medium
9:30
GBP
Markit/CIPS UK Services PMI (OCT)
58.5
58.7
Medium
10:00
EUR
Eurozone Retail Sales (MoM) (SEP)
-0.8%
1.2%
Low
10:00
EUR
Eurozone Retail Sales (YoY) (SEP)
1.4%
1.9%
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.2343
1.2439
1.2493
1.2535
1.2589
1.2631
1.2727
GBPUSD
1.5893
1.5944
1.5973
1.5995
1.6024
1.6046
1.6097
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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