GBP/USD Daily Forecast

Wednesday, Nov 01 2017

Yesterday's session was marked by UK Manufacturing PMI figures. The UK manufacturing sector started the final quarter of the year on a solid footing. Production and new order volumes continued to rise at robust rates, as companies benefited from strong domestic market conditions and rising inflows of new export business. Price pressures remained elevated, however, with rates of inflation in input costs and output charges both accelerating and staying well above historical series averages. The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index registered 56.3 in October, up from 56.0 in September (revised from the original reading of 55.9).

In the US session ADP employment and ISM Manufacturing PMI figures were released. Private sector employment increased by 235,000 jobs from September to October according to the October ADP National Employment Report. Mark Zandi, chief economist of Moody’s Analytics, said, “The job market rebounded strongly from the hit it took from Hurricanes Harvey and Irma. Resurgence in construction jobs shows the rebuilding is already in full swing. Looking through the hurricane-created volatility, job growth is robust.”

The October PMI registered 58.7 percent, a decrease of 2.1 percentage points from the September reading of 60.8 percent. The New Orders Index registered 63.4 percent, a decrease of 1.2 percentage points from the September reading of 64.6 percent. The Production Index registered 61 percent, a 1.2 percentage point decrease compared to the September reading of 62.2 percent. The Employment Index registered 59.8 percent, a decrease of 0.5 percentage point from the September reading of 60.3 percent.

However, focus of the session was on FOMC interest rate decision and the following statement. The Federal Reserve kept interest rates unchanged on Wednesday and pointed to solid U.S. economic growth and a strengthening labor market while playing down the impact of recent hurricanes, a sign it is on track to lift borrowing costs again in December. "The labor market has continued to strengthen and ... economic activity has been rising at a solid rate despite hurricane-related disruptions," the Fed's rate-setting committee said in a statement after its unanimous policy decision. In keeping with that encouraging tone, the central bank's policymakers acknowledged that inflation remained soft but did not downgrade their assessment of pricing expectations.

Tomorrow, from the UK, Construction PMI figures. Analysts expect incline to 48.3 However, the focus of the session will be on BoE interest rate decision, with expected hike to 0.5% as well as BoE's Inflation Report. In the US session Unemployment Claims data will be published. Increase to 235,000 is forecasted.

Figures to watch:

Construction PMI (Thursday 10:30)

Official Bank Rate/BOE Inflation Report (Thursday 13:00)

Unemployment Claims (Thursday 13:30)

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