European Outlook: Japan led a rally in Asian stocks, with technology shares boosting indices to near all-time highs in brisk trade as the Yen dropped and the manufacturing PMI inched higher. U.S. futures are also climbing higher amid ongoing optimism about tax reforms and U.K. futures are equally underpinned. The CSI 300 is in the red, but all in all an optimistic start to the month, as markets focus on today’s conclusion of its 2-day FOMC meeting with no change expected. The BoE will conclude its meeting tomorrow and markets are expecting a reversal of last year’s “emergency” rate cut following the Brexit vote. Today’s calendar is quiet, with many country’s and regions across Europe celebrating All Saints Day. The U.K. and Switzerland release manufacturing PMIs and the U.K. also has house price data from Nationwide.
FX Update: The dollar has been trading mixed so far today, losing ground to an outperforming pound, holding net steady versus the euro while gaining on the yen. The pound traded firmer for a third consecutive day, logging a near-two-week high versus the dollar, at 1.1.3292 and a one-month high against the euro. Sterling markets are anticipating the BoE to hike the repo rate for the first time in a decade at tomorrow’s conclusion of the Monetary Policy Committee meeting. EURUSD, meanwhile, continued to gravitate around the 1.1630-40 area, and USDJPY logged a three-session high of 113.97 amid a backdrop of rallying stock markets across Asia and globally. EURJPY also hit a three-session peak, and other yen crosses also ground higher. Markets are expecting a tax reform announcement from the Trump administration, which is expected to happen on Thursday (a day later than previously advertised), and which is feeding a risk-on sentiment in markets. We expect the prevailing forex trends to hold good for now.
Main Macro Events Today
- UK Manufacturing PMI – Expectations – nearly unchanged at 55.8 from 55.9 on September.
- US ADP Non-Farm Employment Change – Expectations – a 200K jump in private payrolls from 135K last month.
- US Manufacturing PMI – Expectations -a dip to 59.5
- FOMC Statement – FOMC expected to announce no change to the 1.00% to 1.25% policy band today at 18:00 GMT . The policy statement is expected to reiterate the general outlook of moderate growth and subdued inflation, though there could be an upgrade on the economy given the swath of better than expected data, and the report of 3% growth in Q3.
Charts of the Day
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