Currency Note

Positive PMI data increases expectations for interest rate hike

By alexbennett November 24th, 2021

Sterling weakened slightly against the euro yesterday, slipping from the highs seen at the beginning of this week. However, it has gained some ground this morning following better-than-expected PMI data yesterday, which showed that British businesses have experienced the fastest growth in new orders since June.

It was a similar story for PMI figures from the eurozone, which showed that both the services and manufacturing industries have performed above expectations this month. However, the survey also revealed that businesses are worries about the recent rise in COVID-19 cases.

There will be a flurry of data releases in the US today before the Thanksgiving holiday tomorrow. These will culminate in the release of the Federal Reserve’s latest meeting minutes and the markets will be listening closely for comments surrounding tapering and interest rates.

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GBP: BoE Tenreyro to speak later

The pound has started to weaken slightly from highs seen at the beginning of this week. However, it is still trading around strong levels against the euro. Against the dollar, however, sterling touched its lowest level this year, mainly due to greenback strength.

PMI data released yesterday showed that British businesses have experienced the fastest growth in new orders since June this month. Composite PMI, which combines results from the services and manufacturing industries, came in at 57.7, slightly lower than last month but above expectations.

CBI industrial trends orders, which track the number of factory orders across 500 companies, will be released today. As well as this, Bank of England official Silvana Tenreyro will speak today, and the markets will be listening for any comments about interest rates or inflation.

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EUR: Better-than-expected PMI data helps euro

The euro has recovered slightly since the beginning of the week helped by better-than-expected data.

PMI figures for the eurozone came in above expectations across the board, showing that the services and manufacturing industries performed better than predicted. The pace of job creation was strong in the service sector and new business rose. Despite this, future expectations deteriorated due to COVID-19 worries.

Later today, data revealing business conditions in Germany will be released, followed by two speeches from European Central Bank officials.

USD: Dollar steady ahead of Fed meeting minutes

The dollar is steady this morning against both the pound and the dollar. This follows President Biden’s reappointment of Federal Reserve Chair Jerome Powell, which has solidified expectations of an interest rate hike next year.

The Federal Reserve will release the minutes from its latest meeting this evening. The markets will be listening for any news about the tapering of the Fed’s bond buying programme and whether this could accelerate over the coming months.

Before the minutes, there will be a series of data releases including personal spending figures.

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