September 03, 2024

“The deluge of US data begins today with the ISM Manufacturing PMI, as markets build up to Friday’s crucial non-farm payrolls report. We are seeing some high volatility in some currencies ahead of these releases this morning, particularly with the Aussie and Kiwi dollars and the yen.”

Sam Cornford – Head of Trading

GBP

Sterling is on the backfoot this morning around a 1-1/2-week low after trading flat yesterday in a low-volume session. A BRC measure of retail sales this morning rose by 0.8% in August and the most since March, but it has done little to nudge the pound this morning. As discussed yesterday, it’s external developments in charge for sterling this week, and the effect of the US manufacturing data this afternoon on global dynamics will be the pound’s biggest driver today. The BoE’s Bredeen speaks this afternoon in what has become a rare public appearance for British central bankers over the past few months, although the topic is more focused on supervision rather than monetary policy.

EUR

Despite some weak Chinese manufacturing data and news of a far-right regional election win, the euro managed to pick up slightly yesterday. Investors do not seem too concerned about the AfD’s success – or more importantly, the ruling coalition’s losses – just yet, because there remains no real route to government for now. However, it may become a bigger concern in the future. A poor German economic outlook is already well priced into the euro, as is a somewhat uncertain political situation. Today it’s the US data in focus, and in Switzerland this morning inflation fell below expectations to 1.1%. That is now well below the SNB’s 1.5% forecast for Q3, and it heightens the chances that policymakers could shift back to currency management to cool off the franc’s rally and prevent inflation easing further.

USD

US traders are back at their desks today and will be focused on today’s ISM manufacturing print after a long Labour Day weekend. Volatility was subdued in thin trading yesterday, but there have been some big swings so far this morning. The yen has jumped by 0.5%, while the Antipodeans are the biggest losers in some nervy trading, with the Aussie and Kiwi dollars both dropping by around 0.6%. The consensus is looking for a modest uptick in the ISM manufacturing PMI this afternoon, from 46.8 to 47.5, although at this point markets are fairly accustomed to a contractionary US manufacturing sector. There are a couple of subindexes within the report that tend to get some special attention, with the Employment and Prices Paid components particularly pertinent given the focus on the speed of Fed rate cuts this year. The US data is dominant this week, with tomorrow’s JOLTs survey, Thursday’s ISM Services print, and Friday’s jobs report set to dictate FX movements globally.

Markets

With US markets closed, European stocks traded with a touch of caution yesterday after some weak manufacturing data from China and ahead of some key labour market data from the US this week. A continued rise in risk assets will likely depend on where Friday’s payrolls figure comes in.

Main Economic Events (All Times CET)

1:01am: UK BRC Retail Sales Monitor
8:30am: Swiss CPI
9:00am: Swiss Final GDP q/q
4:00pm: US ISM Manufacturing PMI

To learn more about Ballinger Group, please visit our website or our LinkedIn page.