Daily Forex Fundamental Overview

Fundamental Analysis

GBP

"Scratching beneath the surface of the data shows that rising consumer demand and business-to-business spending is helping manufacturing to grow at a robust clip".

- Rob Dobson, IHS Markit

Confidence in the UK's manufacturing sector posted a surprise fall in November, as the weak pound exerted pressure on manufacturers buying materials from abroad. The manufacturing purchasing managers' index fell to 53.4, down 0.8 points since last month, although rates of expansion are still "solid", according to survey compiler IHS Markit. This was the second month of decline in confidence in UK manufacturing, although PMI remained well above the neutral 50 point, indicating that sentiment is still broadly positive.

UK manufacturing PMI dipped below 50 in July as panic over the implications of the vote to leave the European Union took hold, but confidence quickly recovered to pre-referendum levels. However, the one definite effect of the Brexit vote has been the fall in the value of the pound. The recent fall in the Pound has boosted exports, while import prices are seen creeping higher and may in time offset the positive effect of a weaker currency, especially given that export order book growth has already waned markedly from September's five-and-a-half year high.

USD

"With mortgage rates expected to rise into next year and put added strain on affordability, sales expansion will be contingent on more inventory coming onto the market and continued job gains".

- Lawrence Yun , NAR

The number of Americans filing for first-time unemployment benefits rose last week to the highest level since the summer, but the trend remained still consistent with a healthy signs of the US job market. According to the report, initial jobless claims rose to 268,000, showing an increase of 17,000 from the previous week's unrevised level of 251,000. Meanwhile, economists had expected jobless claims to reach 253,000 level. The following increase was much bigger than expected, thus jobless claims reached their highest level since hitting 270,000 in the week ended June 25th. Claims have been below 300,000 since early 2015, showing the longest such streak since 1970. Employers' reluctance to part with workers is one sign of a tight labor market.

In the meantime, US manufacturing was stronger than expected in November, since the strong greenback remains a headache for producers in the sector. According to the Institute of Supply Management and Markit Economics, the ISM PMI went up to 53.2 in November (52.5 expected.) Regional data received over the past month suggested improvement in the sector and had pointed to a strong national reading.

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