Summary:
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USD rising across the board as ISM hits highest since 2004
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Haldane (BoE) gives 1 in 4 chance of a no-deal Brexit
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Pound falls on disappointing construction PMI
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Top 3 charts this week: USDIDX, AUDUSD, SPA35
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Gains seen in crypto space
The biggest data point of the day from the US has come in well above forecast, boosting further an already buoyant buck and seeing stocks recover from their lowest levels of the day. To be specific the ISM manufacturing index for August rose to 61.3 from 58.1 last time out, well above the 57.6 expected and actually the highest reading since 2004. Two of the standout contributors to the rise were new orders and production which came in at 65.1 (vs 60.2 prior) and 63.6 (vs 58.5 prior).
It’s been a busy start to the week for sterling traders with the GBP coming under pressure following a series of negative news stories (see next paragraph). One potential source of hope for pound bulls was this afternoon’s inflation report hearings, with MPC members Carney, Haldane and Tenreyro all testifying following the bank’s decision to raise rates last month. There haven’t been any major revelations from the questions and answers but it has seemingly helped stabilise the pound a little. The main sound bite takeaway from the event was arguably chief economist Haldane who said that he viewed the odds of a no-deal Brexit at about 25% compared to 20% a few months ago - although this is still broadly inline with where they were a year ago.
Growth of the UK construction sector slowed down in August the most in three months as all three major categories saw their indices falling. On the other hand, input cost inflation eased suggesting limited inflationary pressure in the sector in the nearest future. GBP fell lower following the data failing to resist the broad-based USD strength but it recovered throughout the day and by late afternoon it was only the buck that was higher against the pound.
August was a very untypical month as some markets enjoyed great flows (think US indices) while other were in a full crisis mode (Turkish lira in particular). Which way will it evolve in September? Will we see a broad-based risk averse mode or will emerging markets see a relief? A performance of the US dollar will have a lot to say about it and we analyse 2 USD charts. Meanwhile, European indices – like SPA35, could use some of the US resilience. Earlier we looked at 3 charts which could be worth keeping an eye on this week; USDIDX, AUDUSD and SPA35.
There’s some bright spots seen in the crypto space today with Dash and Litecoin both higher by more than 5% at the time of writing. Ethereum is the only market in the red while Bitcoin and Ripple are both little changed. In today’s news flow one can find reports concerning new Deutsche Börse’s blockchain department as well as some information from Australia.
