Daily Market Report 03/12/2013

GBP 

So the week began with the pound continuing its recent impressive run by trading to its highest level against the US dollar since August 2011 and against the euro since January this year. 

Data from Hometrack initially supported the move, with the results showing that British house prices increased in all regions of the UK in November for the first time in 6 years. 

This data was followed up by PMI manufacturing coming in higher than initial estimates to its highest since February 2011. A breakdown of the figures showed that new manufacturing orders increased to the highest in 20 years and employment in sector rose at its fastest pace since May 2011. 

The data continues to add to the impressive figures we have had of late from the UK with markets continued to flirt with the idea that the Bank of England will raise interest rates sooner than expected. 

USD 

The US dollar managed to claw back its early morning losses against the pound and gained against the euro by the afternoon following a string of better than expected data. 

Manufacturing PMI from both Markit and ISM showed that the sector expanded beyond expectations in November with the ISM index rising to its highest level since April 2011 and the Markit index rising to a 10 month high. A breakdown of the figures shows a significant rise in production, new orders and levels of employment suggesting that the factory sector has gained some momentum. 

Construction spending in October also increased by 0.8% adding to further US dollar support. 

EUR 

Despite data showing that manufacturing PMI in November expanded at its fastest pace in more than two years, the single bloc currency lost out to both the pound and the US dollar. It would appear that the positive data from the other two economies overruled these figures thus causing the euro to lose out. 

AUD 

The Reserve Bank of Australia decided to hold interest rates at 2.5%. RBA Governor Glenn Stevens confirmed that current monetary policy remains appropriate but also stressed that the Australian dollar still remains uncomfortably strong. Retails sales for November beat expectations to increase by 0.5% but slowed from October. 

As a result the dollar declined by almost one cent against the pound in overnight trade. 

Today 

The UK construction sector will come into focus this morning. Whilst the sector is forecasted to have expanded for the seventh month in a row in November, the expansion is set to have slowed from October. But nonetheless the pound is continuing to be supported in early trade this morning and we could see another attempt for the pound to breach a two high against the US dollar. 

Key Announcements:

9.30am – GBP – PMI Construction (Nov): Expected to have slowed to 59. 

10.00am – EUR – Producer Price Index (Oct): Expected to fall further to -1%.