Broad Decline in EU, UK, US Manufacturing and Services
Manufacturing and services figures for October revealed a broad decline in performance across the EU, UK and US as inflation and rising interest rates take their toll on investment and consumption.
Flash Purchasing Managers Index (PMI) Composite reports from S&P Global showed EU manufacturing at the level of 46.6 in October, while the services sector was at the level of 48.2.
In the UK, the flash PMI for manufacturing in October was at the level of 45.8 and services fell to 47.5 from 50 previously. The US Global Composite flash PMI for October declined to the level of 47.3 from 49.5 the previous month.
PMI levels under 50 indicate a contraction in the sector and point to a slowdown in the wider economy.
On the brighter side, the world’s second-largest economy, China, reported year-on-year economic growth of 3.9 percent in the third quarter in a better-than-expected result. Gross Domestic Product (GDP) came in at 0.4 percent in the same period last year and there was a consensus of 3.4 percent for Q3 this year. Nonetheless, China’s GDP is held back by ongoing COVID-19 restrictions that affect its manufacturing sector.
Red-flagged trading events coming up this week start with today’s Germany’s IFO Business Climate benchmark for October. The indicator is expected to have fallen to 83.3 from 84.3 in September, but given the uncertainty triggered by the rising interest rate environment there could be surprises in the actual results.
On Wednesday, October 26, Australia’s year-on-year Inflation Rate benchmark for the third quarter will be released. The market expects a rise to 7 percent from the previous result of 6.1 percent. If expectations are met, there could be a reaction from the Reserve Bank of Australia (RBA). The RBA has pulled back on the size of its interest rate hikes, but this could change if inflation swells further.
The Bank of Canada (BoC) will announce its interest rate decision on October 26. The central bank is expected to hike its key interest rate guidance to 4 percent from the current level of 3.25 percent. If there are any surprises in the actual results, there could be an impact on the CAD currency crosses.
It’s a packed week for central bank decisions. The European Central Bank (ECB) will release a likely interest rate hike on Thursday, October 27 with a possible impact on EUR currency crosses. The ECB is forecast to raise its key rate from the current level of 1.25 percent to 2 percent. As with any forecast, there is a possibility of a different result, so traders should manage their risk accordingly.
Finally, the US Durable Goods Orders for September will be published on Thursday. Durable Goods Orders are expected to have risen to 0.2 percent in September from the previous level of minus 0.2 percent in August. If there are any surprises, the USD currency crosses could be affected.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.