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Economic Data, the FED Chair, COVID-19, and Brexit in Focus

Earlier in the Day:

It’s was a busier start to the day on the economic calendar this morning. The Japanese Yen and the RBNZ were in action in the early part of the day.

For the Japanese Yen

Prelim private sector PMIs for September were in focus this morning.

The Manufacturing PMI rose from 47.2 to 47.3, with the Services PMI increasing from 45.0 to 45.6.

According to the September prelim survey,

  • Across the manufacturing sector, production and new orders saw a marked decline once more.
  • By contrast, the rate of job shedding eased to a 4-month low, with business confidence hitting the highest level in over 2-years.
  • Weak external demand weighed heavily on new business across the service sector, which continued to slide at a marked pace.
  • Service sector employment contracted for a 7th consecutive month in September, with incomplete work continuing to decline.

The Japanese Yen moved from ¥105.074 to ¥105.142 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.21% ¥105.15 against the U.S Dollar.

For the Kiwi Dollar

The RBNZ held interest rates steady at 0.25% and the LSAP at NZ$100bn, which was in line with market expectations.

Salient points from the RBNZ Statement included:

  • Economic information available since the August statement confirmed that economic activity remained well below pre-COVID-19 levels.
  • Ongoing restrictions, particularly in Auckland, have continued to dampen economic activity and business and consumer confidence.
  • Any significant change in the domestic and global economic outlook remains hinged on the containment of the virus, which is highly uncertain.
  • International border restrictions continue to materially curtail migration and tourism.
  • Commodity prices for NZ exports remain robust. This has been partially offset, however, by the Kiwi Dollar exchange rate moderating the return to local export producers.
  • The Committee expects a rise in unemployment and an increase in firm closures.
  • Members agreed that monetary policy will need to provide significant support for a long time to come. They also agreed that they are prepared to provide additional stimulus.
  • Additional support could come in the form of Funding for Lending Programme (FLP), a negative OCR, and purchases of foreign assets.

The Kiwi Dollar moved from $0.66022 to $0.6643 upon release of the statement. At the time of writing, the Kiwi Dollar was down by 0.12% to $0.6624.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.53% to $0.7133.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Ahead of the European open, Germany’s GfK Consumer Climate figures are due out for October.

While we can expect plenty of EUR sensitivity to consumer confidence figures, the focus will be on the PMI numbers.

Later in the morning, prelim September private sector PMIs for France, Germany, and the Eurozone will be the key drivers.

While manufacturing PMIs remain important, expect the Service PMIs and the Eurozone’s composite to have the greatest impact.

Another spike in COVID-19 numbers could mute the effects of any positive numbers, however. A reintroduction of lockdown measures would materially hit both services and manufacturing…

At the time of writing, the EUR was down by 0.22% to $1.1682.

For the Pound

It’s also a relatively busy day ahead on the economic calendar. Prelim private sector PMIs for September are due out later today.

Expect the focus to be on the services PMI.

Away from the economic calendar, there’s also Brexit and COVID-19 to consider. Last Monday, the government reintroduced containment measures to curb the spike in new cases. This week, further measures have been introduced that could materially impact consumption and service sector activity.

With the BoE having already floated the idea of negative rates, expect any further containment measures to fuel expectations of a rate cut.

At the time of writing, the Pound was down by 0.08% to $1.2723.

Across the Pond

It’s a busier day ahead for the U.S Dollar. Key stats include prelim private sector PMI figures for September.

The markets will be looking for a pickup in service sector activity to support riskier assets.

Later in the day, FED Chair Powell is due to deliver testimony that will also draw plenty of attention.

The Dollar Spot Index was up by 0.10% to 94.084 at the time of writing.

For the Loonie

It’s a particularly quiet day ahead, with no material stats due out today.

The lack of stats will leave the Loonie in the hands of the prelim PMI numbers from the Eurozone and the U.S.

Expect any further spikes in new COVID-19 cases to also influence ahead of the weekly EIA crude oil inventory numbers.

At the time of writing, the Loonie was down by 0.05% to C$1.3311 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.