2nd October 2019 Market Update
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🇬🇧 GBP – The contraction in manufacturing PMI was not as bad as the market had forecast yesterday, with the reading of 48.3 being released. Factories appear to be stockpiling to protect themselves against no-deal Brexit, as that could lead to a sharp disruption in their supply chains. This was the reason for the higher reading. Despite this, anything below 50 is a contraction.
Sterling was relatively volatile yesterday whilst the Conservative party conference took place. It is now expected that the government’s proposals to end the Brexit deadlock will be sent to Brussels today following Boris Johnson’s speech at the conference. Although the formal proposals are yet to be released, they are expected to suggest that technology could be used facilitate custom checks away from the Irish border.
There is expected to a poor construction PMI reading released today, in line with the previous reading of 45. However, in recent months this piece of data has had limited impact on sterling.
🇪🇺 EUR – Manufacturing data was released from across Europe yesterday, and the readings were generally weak. Spanish, Italian and German PMIs were all below market expectations. This led to the final manufacturing PMI being released at 45.7. Of concern was Germany, where a reading of 41.7 was released. This is has continued to stoke concerns that Germany is on the brink of recession and struggling as the global economy appears to be slowing down. CPI was released below the previous reading at 0.9%, and further to the Eurozone’s woes. This morning Spanish unemployment changes exceeded market expectations; although this also had a limited impact on the euro.
🇺🇸 USD – ISM manufacturing PMI was surprisingly below expectations yesterday, with the PMI being released at 47.8. Markets were spooked, as a weak manufacturing reading from the US shows that manufacturing is contracting across advanced economies. The knock-on effect of this, was stock markets dropping across the globe. This afternoon the ADP non-farm employment change is being released, and this an important precursor to the non-farm employment change released from the US on Friday.
GBP: Johnson expected to make alternative Brexit proposals this afternoon
EUR: Eurozone appears to be slumping, as manufacturing PMI is poor across the EU
USD: Stocks are spooked as surprisingly US manufacturing PMI is below market expectations
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