Yesterday’s data calendar was dominated by Purchasing Managers Indices (PMIs) in Europe and the States. Stateside, all three US PMIs (Services, Manufacturing and Composite) beat expectations and last month’s readings too, with the Composite PMI reaching its highest level since January. In the Eurozone, the Services and Composite PMIs disappointed relative to expectations, however both printed well above expansionary territory (printing 54.9 and 55.9 respectively). In contrast, the Manufacturing PMI reached a six year high of 58.6, against a consensus of 57.8. Overall, the euro strengthened throughout the day, perhaps focussing on the upbeat Manufacturing data whilst also shrugging off concerns about the political unrest in Spain too.

Given the above it was not a surprise to see the euro and USD fair well yesterday testament to the fact that EURCHF reached its highest level since the SNB lifted its 1.2000 floor in January 2015 and 10 year US Treasury yield tipped over 2.41% yesterday too, sending the USD to the highest level since mid-July.

In other news solid earnings reports from US blue-chip companies lifted equities the USD and treasury yields. Also helping the USD was the news that John Taylor is now firm favourite now to become Fed Chair. Trump asked Senate Republicans for a show of hands in support of potential nominees for chairman of the Fed as he took part in a lunch meeting yesterday with the caucus, with Taylor reportedly being the winner. In Australia, weaker than expected Australian CPI data has seen AUD lower and bets trimmed on an RBA rate hike. In New Zealand, the NZD fell further after Prime Minister-elect Ardern said she plans to review the RBNZ’s policy mandate. She also unveiled her new ministerial line-up, with just a handful having previous experience in Cabinet.

Turning our attention to these shores, UK Finance Minister Hammond said that businesses should have confidence that the government will provide them the certainty they require on a Brexit transition. He also insisted that the Government will focus on cutting the deficit, rather than succumb to pressure from communities’ secretary Sajid Javid, who’s made the case to borrow in order to invest in infrastructure and housing.

As we approach the business end of the week, the ECB policy announcement naturally is naturally grabbing all the attention, however worth noting that also on Thursday, we have the Riksbank and Norges Bank rate decisions, with the Bank of Canada kicks starting proceedings with its meeting today. Across the board, no rate changes are expected, so traders will be closely examining any potential changes in the trajectory of policy.

The day ahead

Today focus domestically will no doubt be on the first estimate of UK Q3 GDP numbers. The market is expecting Q3 GDP growth to rise by 0.3%, which would be in line with the first two quarters. From 2013 until 2016, the UK was ranked first or second in terms of economic growth within the G7. If today’s number is as expected, we will now be competing with Italy and Japan for the wooden spoon in that league table. If we do find ourselves in last position it will be the first time since 1992! Other notable releases to watch out for are German IFO (09.00), US MBA Mortgage Applications (12.00), Durable Goods Orders and New Home Sales (13.30). 

Thought of the day

On this day in 1881, Spanish painter, sculptor, printmaker, ceramicist, stage designer, poet and playwright Pablo Picasso was born. Picasso was one of the greatest and most influential artists of the 20th Century, he was also the co-creator of Cubism, alongside Georges Braque. Cubism is an artistic movement, which employs geometric shapes in depictions of human and other forms. Over time, the geometric touches grew so intense that they sometimes overtook the represented forms, creating a more pure level of visual abstraction. When painting your perfect Treasury Policy and trying to navigate the abstract FX market, there are many things to consider: budget rates, product type, tenor and percentage to name a few. To discuss how we can help you design a Treasury Policy, please contact your FX dealer on please call 0800 055 6339.