The November ISM manufacturing number will be released this morning and the headline number is expected to rebound to 50.0 from 48.3. After a few months in contractionary territory, this could be a welcome sign that the economy is steadying. A good ISM number could boost trader’s confidence in the NFP release later this week and may bode well for the USD.
EUR/USD is trading quietly at the start of this week as the market awaits ECB President Lagarde’s first testimony before the European Parliament. Traders will look for hints during her testimony as her first rate decision comes at next week’s ECB meeting on December 12th. EUR has not reacted to news out of Germany that the SPD party, the junior coalition party, has voted to replace their leaders with new ones. The SPD party policies do not align with German Chancellor Angela Merkel and this could put her government in danger of being removed.
A number of polls out of the UK over the weekend have shown the Labor party has narrowed the Conservative Party’s lead. Polls show that lead to be anywhere from 6 to 15 points. UK PMI came in slightly higher at 48.9, better than the expected 48.3, but still reflecting a contracting economy. The London terrorist attack was a main news item over the weekend with each party blaming each other’s policies as the reason for the attack. Despite all of this, the GBP/USD remains relatively strong as we begin the week.
Japan released their November PMI manufacturing number, which came in at 48.9, marking the seventh month of contraction. The number did show some improvement from the October reading of 48.4, but this signals a continuation of the downturn in the manufacturing sector which is being blamed on a decline in new orders. Export orders dropped at their fastest rate since the middle of the year and the USD/JPY has moved higher on this news release.
Oil prices are higher which is helping the Canadian Dollar this morning as traders prepare for the Bank of Canada meeting on Wednesday. Expectations are that the BOC will keep rates unchanged at 1.75%. The accompanying statement will likely point to continued downside risks due to trade tensions.
China Manufacturing PMI rose to 51.8 in November, up from 51.7 the previous month and beating expectations of 51.4. There were good increases in output and new business, while employment was broadly stable. As trade negotiations continue between the US and China, a positive outcome could help this number continue to improve.