- French flash services PMI: 50.3 vs. 49.5 expected, 49.9 previous
- French flash manufacturing PMI: 48.6 vs. 48.0 expected, 48.3 previous
- German flash services PMI: 54.6 vs. 53.2 expected, 53.7 previous
- German flash manufacturing PMI: 53.7 vs. 53.4 expected, 54.5 previous
- Euro Zone flash services PMI: 52.7 vs. 52.3 expected, 52.8 previous
- Euro Zone flash manufacturing PMI: 51.9 vs. 52.0 expected, 52.8 previous
- Euro Zone flash composite PMI: 52.9 vs. 52.5 expected, 53.1 previous
- U.K. flash services PMI: 47.4 vs. 48.8 expected, 52.3 previous
- U.K. flash manufacturing PMI: 49.1 vs. 48.7 expected, 52.1 previous
Today’s morning London session was relatively quiet and price action was mostly choppy. The pound got dumped very hard across the board, though, thanks to the release of Markit’s PMI report.
Net negative U.K. PMI report – Earlier during the session, Markit released a special edition of its PMI report to gauge the economic impact of the pro-Brexit vote in the U.K., and it was bad overall.
The U.K.’s manufacturing PMI came in at 49.1, which is better than the 48.7 consensus, but worse than the pre-referendum reading of 52.1 and a 41-month low to boot. The U.K.’s services PMI, meanwhile, came in ay at 47.4, much worse than the expected 48.8 reading and the previous month’s 52.3, as well as an astounding 88-month low.
Commentary from the PMI report also noted that “Manufacturing output and new orders both fell for the first times since the opening quarter of 2013.” The service sector got it even worse since “Services activity and new orders both fell at the quickest rates in over seven years, with series-record month-on-month drops in the respective index levels.”
The sudden and substantial slowdown in both the manufacturing and service sectors were attributed to “ongoing uncertainty pre- and post-EU referendum, with reports especially prevalent among service providers. ”
U.K. Finance Minister Hammond speaks – In an interview earlier, U.K. Chancellor of the Exchequer Philip Anthony Hammond tried to downplay Markit’s U.K. PMI report by saying that “the PMI data is a measure of sentiment, it’s not a measure of any hard activity in the economy. What it tells us is businesses confidence has been dented, they’re not sure, they’re in a period of uncertainty now“.
But he did say that he’s relying on the BOE to use whatever monetary tools it has to address any concrete signs of a slowdown in the short term, adding that: “Over the medium term we will have the opportunity with our Autumn Statement, our regular late year fiscal event, to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months.”
As for details, he only said that: “Exactly what that framework looks like will depend on the state of the economy at the time of the Autumn statement. The data that we see over the next three months or so will be crucially important in shaping our response.”
In short there’s a very good chance they we’ll get some form of monetary easing from the BOE, based on the most recent BOE policy decision, but in addition, we may also be getting a form of fiscal response as well.
Major Currency Movers:
GBP – The pound was in the hot seat during almost the entire duration of the morning London session, thanks mainly to the net negative PMI report, although Hammond’s statement about a possible fiscal response possibly helped as well.
GBP/USD was down by 124 pips (-0.94%) to 1.3114, GBP/JPY was down by 116 pips (-0.83%) to 139.08, GBP/CHF was down by 131 pips (-1.01%) to 1.2920
- 12:30 pm GMT: Headline (0.1% expected, 0.4% previous) and core (-0.1% expected, 0.3% previous) readings for Canada’s CPI
- 12:30 pm GMT: Headline (0.0% expected, 0.9% previous) and core (0.3% expected, 1.3% previous) readings for Canada’s retail sales
- 1:45 pm GMT: Markit’s flash U.S. manufacturing PMI (51.5 expected, 51.3 previous)
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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