Trading was somewhat flat but buy and sell activity is likely to reach top gear as investors eye the European Central Bank’s policy announcement, US GDP and non-farm payrolls data and the Bank of England’s decision on interest rates. The British pound could see some exaggerated movement should data on Britain’s key services industry surprise markets. UK construction data unexpectedly hit a six year high and another positive surprise could support the pound. The US dollar hit a six week high against a vulnerable euro but gains were undone after three Federal Reserve officials suggested that US quantitative easing will remain in place for a while yet. The euro found some relief from selling pressure, supported by positive data on the euro zone’s manufacturing industry. However, negative comments from Italy about the euro’s strength and bets that the ECB will add to monetary stimulus have put the single currency back in the red.
Sterling
Sterling traded positively but remained within a familiar price range against its main trading rivals despite a gauge of UK construction activity, buoyed by the UK government’s Help to Buy and Funding For Lending housing schemes, rising to a six-year high. Construction sector PMI survey unexpectedly increased to 59.4 in October from September’s 58.9, beating estimates of no change. The British Retail Consortium said that its measure of UK retail sales showed a 0.8 per cent (y/y) increase in spending in October, up from the previous month’s 0.7 per cent increase.
US dollar
The US dollar rose to a six week high against the euro but did struggle later in the session against profit-taking on its climb ahead of data that is expected to show growth in US services slowed in October. The ISM non-manufacturing index is expected to drop from 54.4 in September to 54.0 last month and may underscore worries about how US fiscal policy is restraining business activity and confidence.
Euro
Investors paused recent selling of the euro after revised data on the eurozone’s manufacturing industry confirmed a positive trend was emerging but the single currency remains under pressure ahead of the European Central Bank’s policy decision. Weaker prices underline poor consumer demand across Europe and will increase pressure on the ECB to add to monetary stimulus. One option which ECB has discussed in the past is a negative deposit rate which discourages banks from parking money with the central bank.