Is Bad Economic Data Actually Good For The Pound?

Big beat in German PMI
UK Services stalls
Nikkei 0.06% Dax 1.79%
UST 10Y 0.668 (SPTL)
Oil $40 (OIL)
Gold $887/oz (GLD)
BTCUSD $10490/oz. (BITCOMP)

Asia and the EU
RBNZ remains at 0.25%
EUR Flash PMI Manufacturing 53.7
GBP UK PMI Services 55.1

North America Open
USD Flash PMI 9:45
USD Chair Powell 10:00

Risk on flows persisted in Asian and early European trade with stock index futures slowly pushing higher as Nasdaq (QQQ) crossed the 11200 marks by mid-morning London dealing. In FX the price action was much more muted with majors essentially treading water even as data from the region showed some improvement.

The biggest upside surprise of the night came from German PMI Manufacturing data which posted a very strong gain of 56.6 versus 52.0 eyed. According to Markit, “Goods producers reported ramping up production in line with increasing inflows of new work, which rose at the fastest rate for more than a decade in September, helped in turn by a steep and accelerated increase in new export orders. While service providers also recorded growth in new business, the increase was only modest and the slowest in three months, with demand from international clients remaining particularly subdued.”

The offset from slower growth in services dampened any response in EURUSD (FXE) which remained quiet trading near the 1.1700 figure but the news suggests that recovery on the Continent is taking shape and along with the expected fiscal stimulus should prove supportive for growth in months ahead.

In the UK the PMI services report disappointed coming in at 55.1 versus 57.00 eyed. Markit noted that “September data pointed to a setback for the recovery in UK private-sector output, with the rate of expansion easing from August’s 72-month high. The slowdown reflected weaker rises in both manufacturing production and service sector activity. UK private sector companies also pointed to another drop in business expectations for the year ahead, with the degree of optimism falling to its lowest since May.”

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