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November 2015

Daily Currency Insight

Published: Tuesday 03 November 2015


Monday brought a swathe of Purchasing Managers Indices and not a great deal of movement in the foreign exchange market. 

Canadian manufacturing activity sank to a fresh low in October. Continuing uncertainty and frustrating low oil prices led to the manufacturing PMI printing at 48.0; below the market forecast, last month's reading and, more crucially, below the 50 index reading that signals the pivot between expected growth and decline. In fact this index has been below 50 for 7 of the last 10 months. The Canadian Dollar weakened on the news.
 
But the US data wasn't much better. The ISM manufacturing survey posted a 50.1 reading (barely into growth) whilst the employment element of the survey came in at 47.6. That's a salutary message to the Federal Reserve to leave the base rate alone for now and I suspect they will heed that call.  The US Dollar was largely unchanged on the day. This afternoon brings US factory orders and the forecasts for that are pretty dire. So; and this is probably me looking for a silver lining but, if the data is any better than the rubbish forecasts, the US Dollar has room to strengthen.
 
By way of contrast, the UK manufacturing sector is in rude health according to the CIPS survey released this morning. The reading on that index was 55.5; hugely better that the forecast 51.4 and better than last month's reading as well. Sterling rallied briefly but slipped back before the end of the day as traders took profit.
 
Europe’s manufacturing PMI index was better than expected and above the 50 pivot point. At 52.3, it looks much more positive than that of the US but European manufacturing has had a battering, so it's starting from a very low point. Ultimately, that optimism probably doesn't translate into the same magnitude of growth.
 
The Reserve Bank of Australia left their base rate on hold at 2.0% early this morning (UK time). That appears to have caught many traders napping because a sizable percentage of the market had expected a rate cut. This is a record low for Australia’s base rate but we still believe the RBA will have to cut rates again in the months ahead; maybe as soon as December. The Sterling – Australian Dollar rate has fallen 3 cents over the last 24 hours.
 
And so if you thought your Halloween was scary, imagine sitting in your car whilst a 30 foot pumpkin rolls past, and smiling all the time. The stuff of nightmares? Or maybe just an inflatable jack-o-lantern that broke free from its moorings in high winds and set off through Preoria, Arizona. You can see the video of it online but I couldn’t help imagining a maniacal laugh as it rolls through town.   

Fishing

 
I saw a guy fishing on a river bank. I asked him, “How’s it going. Have you caught much?”
He said, “I’ve caught loads today.”
I asked, “What are you using as bait, maggots?”
“No, liquorice,” he said.
“Really! What have you caught using liquorice?”
“All sorts.”