This month, Markit issued the flash PMI business confidence readings for the first time. The November manufacturing index declined to a 2-month low of 48.3 from 49.6 previously with the services-sector index declining to a 40-month low of 48.6 from 50.0. Political developments remained important with a dip in stock-building by manufacturing while underlying uncertainty surrounding the General Election undermined wider activity. The data had a significant impact undermining Sterling support with a decisive break below 1.2900 against the dollar also a negative element.
The currency dipped to lows of around 1.2825 while the Euro tested 0.8600 before stalling CFTC data recorded a small increase in net short, speculative Sterling positions for the latest week with renewed potential for short covering if sentiment improves further. Latest opinion polls indicated that the Conservative Party maintained a firm lead with no evidence that Labour was closing the gap. Prime Minister Johnson also promised that Brexit legislation would be reintroduced before Christmas if he won a majority. Sterling opened this morning around 1.2850 on the Dollar and 1.1650 on the Euro.
President Trump stated on Friday that a trade deal with China is potentially very close, although the impact was very limited given the mixed message and number of caveats. US Treasuries pared gains following the US data, although the dollar was unable to make significant headway.
The US PMI manufacturing index strengthened to a 7-month high of 52.2 for November from 51.3 previously and above consensus expectations. The services sector index strengthened to a 4-month high of 51.6 from 50.6 in October. Order backlogs increased for the first time since July and there was also a marginal employment increase for the month. Businesses, however, were less confident over the outlook. The data underpinned the dollar, especially as it suggested that the US economy was out-performing the Euro-zone and hence the Euro against the Dollar dipped just below 1.1020.
The French PMI manufacturing index strengthened in November and registered the 6th successive reading at or above 50.0. The German manufacturing index also improved slightly to 43.8 from 42.1, although it has been in contraction throughout 2019 while the services index weakened for November. The overall Euro-zone manufacturing index was little changed with the services index at a 10-month low and the data failed to lift sentiment towards the economy.
ECB President Lagarde stated that monetary policy could achieve its goal faster and with fewer side effects if other policies were supporting growth. She also commented that monetary policy will undergo a strategic review to begin in the near future. As of writing, the Euro is trading at 1.1025 against the Dollar.
Data to watch
09:00 - EUR - German IFO Business Climate
Posted in Daily Market News on Nov 25 2019