Daily Market Report - 02/10/2014

EUR
More bad news for Germany yesterday as growth in its manufacturing sector has ground to a halt. German manufacturers reported the first drop in order intakes since June 2013, with the pace of contraction the quickest since late 2012. German manufacturers reported the first drop in order intakes since June 2013, with the pace of contraction the quickest since late 2012. This is after 14 consecutive months of growth. The reasons behind this are the Russian sanctions and a generally  weak Eurozone economy.  

On the back of this the Euro has fallen by almost half a cent against the USD to a new two-year low . Investors are anticipating that the unexpected (although small) contraction in Germany’s factory sector raises the chances of further stimulus measures from the European Central Bank.

The overall Euro area manufacturing PMI from market also fell back to 50.3 from 50.7 the previous month, this also a 14 month low. Markit the surveying company that reports the PMI figures has said the economic turmoil among manufactures is spreading with firms in Germany, Austria, Greece and France all reporting a downturn last month.

GBP
The UK’s manufacturing sector also suffered this month, falling to a 17 month low of 51.6 from 52.2 in August. Markit has said that new export demand fell; this was blamed on the strength of GBP against the EUR and weaknesses in the EUR area economy. The EU buys up around half of all UK exports, so the slowdown in the Eurozone is a serious worry.

USD
Adding to the weak manufacturing data today the ISM US manufacturing activity index also fell from 59 to 56.6. Better news in the labour market for the US,  with the private sector adding 213,000 new jobs last month; this was slightly ahead of expectations. This also suggests that Friday’s non-farm payroll will show at least 200,000 new jobs were added. This suggests we could see some dollar strength late Friday.

Key Announcements
GBP – 9:30 BST: UK PMI Construction (Sept) set to fall to 63.5 from 64
EUR – 12:45 BST: ECB Interest Rate Decision 
EUR – 13:30 BST: ECB Monetary Policy Statement
USD – 13:30 BST: Initial Jobless Claims expected to rise to 297K
USD – 13:30 BST: Continuing Jobless Claims expected to fall to 2.438M

Our dealers are available via e-mail (dealers@rationalfx.com) or by phone (020 7220 8181).