Positive UK economic data and US dollar weakness seem inadequate to lift the Cable from its September lows. Markit’s final UK Manufacturing Purchasing Managers’ Index printed 60.3 points in August, an improvement from the early read of 60.1 and a figure reflecting robust growth in absolute terms. Strong demand and high employment overshadowed some supply issues, yet the pound hardly moved.
The US dollar is stuck on Wednesday after gaining from end-of-month flows on Tuesday. Some of the US Dollar shorts were covered as August ended, but the predominant optimistic market mood is now weighing on the safe-haven dollar. Worse than expected US consumer confidence seemed to have been priced in by investors – the Conference Board’s statistic stood at 113.8 points in August.
The attention now moves to the big-name indicators. ADP’s labor market data is set to show an increase of over 600,000 private-sector jobs last month, nearly double last month’s report. While correlation with Friday’s official Nonfarm Payrolls statistics is weak, the publication tends to stir markets.
The second NFP clue is more important – and may have an immense effect this time. The ISM Manufacturing PMI is the last NFP hint, as the parallel Services PMI is due out only after the jobs report. Moreover, tensions are high around the Federal Reserve’s decision later in the month and especially after Fed Chair Jerome Powell refrained from committing himself to reducing bond buys. High uncertainty means higher volatility.
The ISM Manufacturing PMI is, therefore, substantial and could boost up the dollar. The pound is badly positioned for such an outcome.
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