Today's data release
 Key levels
09:00EZ Manufacturing PMI SupportResistance
UK Manufacturing PMIGBP/ USD1.31631.3467
10:00EZ Unemployment rate
GBP/ EUR1.12581.1438
14:45US Manufacturing PMI
Market overview

The Euro took a knock in Asian trade this morning as investors kept an anxious eye on the independence vote in Spain’s Catalonia. Spain is facing a political crisis after Catalans voted for independence in a contested referendum that descended into violence when police cracked down on polling booths, injuring hundreds. The Catalan government said it had earned the right to independence from Spain after preliminary results showed 90% of respondents were in favour of a split, though turnout was relatively low and Madrid said the vote was illegal. So it is thought that the Catalan parliament will declare independence later this week, further increasing tensions between the region and the Madrid government. Some 844 people were injured as riot police raided polling stations on Sunday, dragged away voters and fired rubber bullets during clashes -- scenes that reverberated across Europe.

Friday saw the release of UK GDP revisions for Q2, it was unrevised at 0.3% Q/Q, although the Y/Y figure was pushed down to 1.5% from 1.7%, due to lower growth estimates over the H2 last year. Sterling struggled to gain momentum heading to a 2 week low of 1.3350 against the Dollar. That followed BoE governor Carney’s comments to BBC radio Friday morning, where he said, "Majority of MPC say may be appropriate to raise interest rates if the economy stays on track". He added, “Indications are that the UK economy is on track for rates to increase and the rate hikes will be limited and gradual if they increase." All eyes will be on the UK’s fundamental data releases this month, in particular, headline inflation scheduled for 17th October. Investors will be keeping a close eye on this reading to determine whether the current 82.6% (according to Bloomberg) chance of a rate hike in November is still on the cards. 

The week ahead

On the domestic data front, the focus will be on the PMIs for the UK’s manufacturing (today), construction (tomorrow) and services (Wednesday) sectors. The data will provide an updated picture of how the UK economy was fairing at the end of the third quarter; we expect to see the manufacturing PMI record a 1.6pt drop to 55.3 whilst we expect a rise in the equivalent services survey from 53.2 to 53.7. From the Bank of England, the record to the 20 September Financial Policy Committee meeting will be published on Tuesday morning. This will be worth watching closely for any clues on measures being worked on to tighten up on consumer credit criteria, ahead of November’s Financial Stability Report.

Stateside, the non-farm payrolls report will be a key focal point for markets at the end of the week. The non-farm payroll print could look very weak, with the September payroll period blighted by Hurricanes Harvey and Irma. The uncertainty surrounding any September payroll forecasts will be very high, but for what it’s worth we are forecasting a zero non-farm payroll print after the +156k recorded in August. The Fed will pay little attention to the reading and await some clean data, but this does not mean markets might not be spooked if a very poor reading is published. We expect the unemployment rate to hold steady at 4.4%. Other top-tier US data due next week include the ISMs for the manufacturing and non-manufacturing sectors and, ahead of the main payrolls report, we will have the ADP employment report mid-week. The Fed, in our view, is continuing to gear up for a December rate move. Fed Chief Yellen has had quite a lot to say recently; she speaks again Tuesday. Finally, in US politics we expect the first efforts to be made in Congress to progress the Republican tax reform proposal. The next step will be to pass a budget resolution that would allow a tax bill to pass the Senate with a 51-vote majority.

Thought of the day

A famous photographer, John Paul Caponigro, was once labelled as saying “Looking and seeing are two different things” and this can be very much applied when analysing your corporate FX exposures. Looking at endless numbers and spreadsheets can often provide very little guidance or colour to where your risk lies and the necessary approach to be taken. Introducing the Investec Treasury Roadmap – a bespoke tool for your FX positions that will allow you to visualise and map your positions against potential market movements. Our customers are increasingly relying on this tool to assess their trades prior to their next hedge, communicate strategy to management and generally keep sane about FX oversight. If you would rather see your FX exposure and not just look, please contact your Investec Dealer to ask for your very own Investec Treasury Roadmap.

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