US PMIs on Friday afternoon were far from perfect when compared to the PMI numbers from the UK and Europe on Thursday morning. Manufacturing activity contracted more than expected whilst the service numbers expanded further. Price action from Thursday continued as a result with GBP and EUR both rising and USD declining. Overall GBP was the biggest benefactor of last week's moves in the FX space.
* Daily move - against G10 rates at 7:30am, 27.11.23
** Indicative rates - interbank rates at 7:30am, 27.11.23
UK data this week is non-existent, so move on GBP pairs will be reliant on news and data from elsewhere as well as whether market risk sentiment remains positive or not. In focus will be inflation numbers from Europe expected to show that core inflation has fallen to 3.9% in November from 4.2% in October and the headline number down to 2.7%. Stateside we will be watching out for the release of the ISM manufacturing numbers looking out for a rebound in activity, 2nd estimates of growth in the third quarter to be raised from 4.9% to 5% and the Fed preferred measure of inflation, core PCE to come in lower again to 3.5% - possibly adding to the case for additional Fed rate cuts next year. Month-end flows will be in focus which could well see further weakness on USD.
GBP’s outperformance last week dragged GBPEUR off the six-month lows and now looks to be testing the August downtrend. A break through the upper resistance line and then break above the Oct/Nov high could then threaten a test of the 2023 high as well.
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