Daily Forex Fundamental Overview

Fundamental Analysis

USD

“This last quarter is having the year finish up pretty strong”.

- Anthony Nieves, ISM

The United States’ services sector activity hit its one-year high last month, official figures revealed on Monday. The Institute of Supply Management reported its Non-Manufacturing Purchasing Managers’ Index advanced to 57.2 in November from the previous month’s 54.8 points. The November figure was the highest since October 2015 and marked the 82nd straight month of growth in the sector, while analysts anticipated the Index to come in at 55.3 in the reported month. Any reading above the 50 point level indicates expansion in the services sector, which accounts for more than two-thirds of the US economy. Furthermore, the Employment Index climbed to 58.2 from October’s 53.1 points, showing that hiring rose at a much faster pace in November. The Non-Manufacturing Business Activity Index rose to 61.7 from 57.7 in October, while the New Orders Index dropped to 57.0 from 57.7 and the Prices Index came in at 56.3, losing 0.3 points during November. The majority of respondents expressed a positive view of the economy. Earlier, Markit’s final Services PMI for the US came in at 54.6, slightly below the 54.8 point forecast. As a result, the EUR/USD was unchanged at 1.0728, while the GBP/USD fell to 1.2712 from 1.2716 from ahead of the release and the USD/JPY rose from 114.37 to 114.62.

GBP

“The further upturn in the vast services sector shows that the pace of UK economic growth remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit”.

- Chris Williamson, Markit/CIPS

Growth in the largest sector of the British economy accelerated at the fastest pace since January last month, although managers’ view of the economy’s long-term prospects deteriorated significantly, a private survey revealed on Monday. The Markit/CIPS Services Purchasing Managers’ Index advanced to 55.2 in November, following the preceding month’s reading of 54.5, while market analysts anticipated a slight fall to 54.2 points. However, business sentiment was at its lowest since July in the reported month and the second-lowest since December 2012 amid the steep drop in the value of the British Pound and uncertainty over the outcome of the withdrawal negotiations between the UK and EU. Despite the fall in the manufacturing growth rate reported last week by Markit, the economy is still expected to maintain the last quarter’s 0.5% growth pace in the Q4. Back in November, the Bank of England revised up its 2016 Q4 economic growth forecast to 0.4% but added that annual growth would fall to 1.4% in 2017 from 2.2% in 2016, mainly driven by higher inflation. According to the Central bank, inflation will climb to 2.7% next year from 0.9% in the latest data. Nevertheless, analysts state the BoE is unlikely to raise interest rates in the near future.

EUR

“The composite PMI was revised down slightly but it’s still consistent with a pickup in euro zone GDP growth which is quite positive”.

- Stephen Brown, Capital Economics

Business activity in the Euro zone hit its highest level this year last month, official data showed on Monday. According to Markit, the final Composite Purchasing Managers’ Index came in at 53.9 in November, slightly below the preliminary reading of 54.1 but up from the previous month’s final 53.3 points. The November figure marked the best reading since December 2015, with Ireland and Spain posting the strongest rates of increase and Germany contributing the greatest to the last month’s expansion. In the meantime, the final Services PMI reported by Markit came in at 53.8 in November, following the flash estimate of 54.1 points. The Index remained above the 50 point level for the 40th straight month. The New Orders Index for the services industry climbed to 53.5 in the same month from 52.6 registered in October, while the Composite Output Price Index increase to 50.6 from the prior month’s 50.0 points, the highest since August 2011. As to the region’s manufacturing production, growth in the Euro zone’s manufacturing sector slowed slightly from the preceding month. Still, manufacturing activity expanded at a slightly faster pace than services business activity. The latest PMI surveys suggest the economy is growing at an annualized pace of 0.4% in the Q4.

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