There’s a bad taste in the mouth of the Organization for Economic Cooperation and Development, which said that the global economy is stuck in a “low-growth trap” and that monetary policy is doing more harm than good. Markets are lower this morning, with Asian stocks falling overnight, Europe’s Stoxx 600 Index also lower, and S&P futures down by around 0.3%. The European Central Bank’s first venture into corporate-bond purchases, which began today, is failing to impress so far. Will the stimulus help, or will it do as little for European companies gripped by paralysis as quantitative easing?
UK manufacturing figures have been released, but it’s a glass half full/half empty situation. PMI has crawled upward to 50.1, but the sector’s pace of growth is slow and points to a continued drag on the UK economy. Figures from the Purchasing Managers Index showed a slight increase above the key level of 50, with anything below that signaling contraction. The somewhat positive data news is failing to lift the sterling. The UK is experiencing fallout from yesterday’s Brexit poll, which showed an increase in support to leave the union. Another poll shows the “leave” and “remain” sides neck to neck, contributing to the pound’s biggest drop in 10 weeks. A measure of pound one-month volatility against the dollar is around 20%, the highest since 2009.
EU manufacturing PMI remains at 51.5, coming in as estimated at a three-month low. The soft data is failing to support a rally for the euro, and the EURUSD pair is trading flat. Meanwhile, the Australian dollar is flying higher after a much stronger than expected GDP report. The central bank might still have reason to cut rates though, as growth is concentrated on resource exports, with consumption and household spending still relatively weak. The US will also have data to mull over today, with Markit manufacturing PMI and ISM manufacturing being released later this morning.
EURUSD: Euro trading flat against the dollar in anticipation of ECB meeting and US data.
GBPUSD: Pound falls for the second day against the dollar.
AUDUSD: AUD trading higher after positive Australian GDP data and upbeat Chinese manufacturing figures.
USDCAD: Canadian dollar regains momentum ahead of Canadian and US manufacturing data.