PMI Data to Kick Off New Month

Daily Analysis - 02/11/2015

Manufacturing Figures Due From Across the Globe Set the Tone For Risk Assets

Manufacturing surveys from various economies are due for release today as China’s survey data continues to indicate a contraction in the broader economy. Of interest today in particular will be the manufacturing figures set to be released by the UK and US.

Euro Area Inflation Subdued

The flash CPI estimates released for the Euro Area on Friday showed headline CPI estimates to have remained flat at 0.00%, while core CPI increased to 1.00%, rising above estimates and up from last month's 0.90% print. While the modest uptick in the core CPI reading might be something to cheer about, inflation remains at the same levels recorded since the ECB started its massive bond purchase program. In light of the CPI estimates, the focus turns to Draghi's speeches during this upcoming week where he is due to present at the ECB banking forum in Frankfurt. The markets will be carefully watching for any new hints from Draghi as far as strategies for tackling inflation and the steps the ECB will need to take thereof. EURUSD closed Friday's session on a bullish note, trending marginally above the 1.1000 psychological level.

Canadian GDP Remains Weak

The monthly GDP report from Canada released on Friday showed the economy expanded at a modest pace of 0.10% for the month while annualized GDP rose by 0.90%, missing estimates of 1.00% expansion while the previous month was revised lower to 0.70%. The gains in the economy were led by the rebound in manufacturing, retail and the oil and gas sectors. The Bank of Canada forecasted that the Canadian economy was expected to grow 2.50% in the third quarter after revising growth from 1.50% previously. The USDCAD pair remained subdued on the GDP release but managed to gain towards late in the session on Friday trading, closing at 1.3070. The weekly charts have printed a bearish dark cloud cover candlestick pattern with the daily session showing three consecutive days of decline. Key support appears at 1.2850 which marks the lows from September 15^th.

China Manufacturing PMI Softens

Manufacturing data from China released over the weekend saw a softer than expected reading with the manufacturing PMI for October printing at 49.8, missing estimates of 50.0 and staying at the same level compared to the previous month. The subsequent non-manufacturing PMI was also a resounding disappointment, printing at 53.1, below estimates of 53.4. The Caixin manufacturing PMI released earlier in the session today showed a modest improvement to 48.3, above estimates of 47.5 and up from 47.2 previously but nevertheless remaining in contractionary territory. The vulnerable manufacturing sector is likely to keep the pressure up for the PBOC which has delivered rate cuts and has decreased reserve ratio requirements multiple times over the past year. The Yen was trading stronger on the data with USDJPY trending near 120.31 after opening the week, gaping lower to 120.34.

US ISM Manufacturing PMI

The ISM manufacturing PMI is due for release today with expectations of a reading at 50, down from 50.2 previously, largely mirroring global manufacturing sector developments as the export economy continues to shrink. Economic data from the US will start to gain even more importance as the Fed leaves the door open for rate hikes in December if the data remains supportive. Monthly PCE, the Fed’s preferred gauge of inflation, remained tame after rising 0.10% for the month, missing estimates of 0.20%, but nevertheless could provide the catalyst for anchoring of expectations. The ISM Manufacturing PMI ahead will also provide clues into manufacturing sector hiring which will feed into the jobs report for the previous month ahead of the NFP report due later in the week. The S&P 500 closed Friday on a disappointing note at 2073, forming a bearish engulfing candlestick.