U.K. Economic Data on Tap
Price action is set to start early in today’s Asian trading session, with the New Zealand quarterly inflation report due. As with most of the major economies, there appears to be a slowdown in global inflationary pressures, which might be mirrored in the latest CPI data from New Zealand. Bear in mind though that the latest GDT auction indicated a 1.4% pickup in dairy prices, which could contribute positively to CPI.
RBA Governor Stevens could also trigger some moves among the Aussie pairs, as he is scheduled to give a testimony in the early Asian session. Dovish remarks could keep the Australian dollar weak, as the RBA has been keen on keeping further gains in check. Another potential mover for the Australian dollar, at least in the short-term, is the NAB business confidence release. A strong rebound could lead to a quick rally while a weak reading could undermine Aussie strength.
China is set to print the HSBC version of the flash manufacturing PMI for October, which could show another expansionary reading. A reading below 50.0, however, would indicate industry contraction and might be negative for the Australian economy, from which China sources its raw materials and commodities. On the other hand, a reading higher than the previous one would reflect a faster pace of growth and reassure traders that the world’s second largest economy is stable.
PMI readings will also dominate the London trading session, with Germany and France set to print their manufacturing and services indices for September. Bear in mind that most of these readings reflected weakness in the previous months and another downturn would remind everyone that the euro zone is set to fall back into recession. While this expectation has been priced in, the euro could stand to see more weakness if the readings are low enough to guarantee further easing from the ECB.
Meanwhile, pound pairs could take their cue from the UK retail sales release, which might see a downside surprise if the actual reading comes in below expectations. Recall that the UK saw a weaker than expected employment increase in the same month, which might be enough reason for people to restrain their spending. However, an upbeat reading could remind traders that the UK is one of the better performing major economies and put the BOE on track to hike rates sometime next year.
CBI industrial order expectations and BBA mortgage approvals are also lined up from the UK, with potential improvements in the cards. If so, traders could start reassessing their bearish pound biases and renew their long positions.
Volatility could slow down in the US session, with only a few medium-tier reports on tap. The initial jobless claims is due and another reading below 300K could lead to a dollar rally, as this would set the stage for a strong employment report for the month of October. Also lined up is the US flash manufacturing PMI, which could be in for a small uptick, based on the early PMI readings from various Fed districts.
The EU Economic Summit is also set to kick off today and possibly have a say on longer-term euro price movements. While the possibility of a euro zone recession has been more or less accepted, commitments to take measures to alleviate this might still keep the shared currency afloat. Signs of conflict among the member nations, particularly opposition from Germany, could dash hopes of seeing a euro zone recovery and lead to more weakness and risk aversion