General decline in manufacturing and services in the EU, UK and US

Manufacturing and services figures for October showed a general decline in performance in the EU, UK and US as inflation and rising interest rates weighed on investment and consumption.

S&P Global’s composite PMI flash reports showed that EU manufacturing was at the 46.6 level in October, while the services sector was at the 48.2 level.

In the UK, the flash PMI for manufacturing stood at 45.8 in October and that for services fell from 50 to 47.5. The US global PMI for October fell to 47.3 from 49.5 the month before.

PMI values ​​below 50 point to a slowdown in the sector and signal a slowdown in the broader economy.

On the positive side, the world’s second-largest economy, China, reported economic growth of 3.9% year-on-year in the third quarter, better than expected. Gross domestic product (GDP) came in at 0.4% compared to the same period last year, and the consensus was 3.4% for the third quarter of this year. Nevertheless, China’s GDP is being held back by COVID-19 restrictions, which are affecting the manufacturing sector.

Upcoming stock market events this week begin today with the IFO German Business Climate Index for October. The indicator is expected to fall to 83.3 from 84.3 in September, but given the uncertainty triggered by the rise in interest rates, the actual results may contain surprises.

Events in Australian dollars

On Wednesday 26 October, Australia’s benchmark year-on-year inflation rate for the third quarter will be released. The market expects an increase to 7% compared to the previous result of 6.1%. If expectations prove correct, we may see a reaction from the Reserve Bank of Australia (RBA). The RBA has reduced the scale of its rate hikes, but this could change if inflation continues to rise.

Impact on the DAC?

The Bank of Canada (BoC) will announce its interest rate decision on October 26. Traders expect the central bank to raise its key interest rate, currently 3.25%, to 4%. Any surprises in the actual results may affect CAD currency pairs.

USD

It’s a week full of central bank decisions. The European Central Bank (ECB) will announce a likely rate hike on Thursday, October 27, with a possible impact on EUR pairs. The ECB is expected to raise its key interest rate from the current level of 1.25% to 2%. As with any forecast, the published result may differ from the forecast result. Businesses must therefore take this aspect into account when managing their risk.

Finally, US durable goods orders for September will be released on Thursday. The latter is expected to have risen to 0.2% in September from the previous level of minus 0.2% in August. In case of surprise, currencies in USD may be affected.

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