The key data we were looking out for this week was the PMI data for Q3, coming out of Europe’s three biggest economies; Germany, UK and France. It made for some damning readings in the UK, with the data showing the worst results since July 2016 and its second worst results since 2009. It echoes the uncertainty that the UK is in right now, and Sterling took a fair hit as a result. Germany’s results saw a double-edged sword. On one hand the manufacturing PMI recovered to a to a 5-month high. On the other, the services PMI missed expectations and slumped to a 3-year low. France continued to post a steady performance on both Indexes.
There are two ways we can interpret this data. Whilst it is easy to point the finger at the political uncertainty for the poor UK readings, it was still a fair bit below forecasts and maybe a sign of future foreign direct investment concern into the economy post Brexit. For Germany, you can argue that the manufacturing recession they are in looks to be reaching a climax with improved readings from last quarter. That said, a reading of 43.8 (50 indicates steady performance), in the bigger picture is concerning. The services data proved steady at 51.3 but again below forecast and slightly below Q2’s results. Germany will be praying for US-China trade tensions to be released.
On to that topic and with Christmas around the corner it is not surprising to see top Chinese diplomats urging the US to compromise to develop relations between the countries. Last week we saw progress between the two sides and several strong rumours that a phase 1 announcement was due to be made. However, a week later the trade deal still seems uncertain with mixed reports coming out from the talks. With Christmas being China’s biggest trading season, maybe the US are playing a very good game to get more favourable negotiations. The Dollar took a slight hit as a result.
At the time of writing:
GBPUSD: Trading at 1.2875
GBPEUR: Trading at 1.1640
EURUSD: Trading at 1.1060
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