Ignoring the statistics

3 minute read


On Friday investors were delighted when the US employment data exceeded forecast. On Monday they showed not the slightest interest in a pair of services sector purchasing managers; index readings which also came in higher than expected. To be fair, Markit's 54.8 and the ISM's 60.3 did not carry the same weight as quarter of a million jobs and the fastest pace of wage growth in nine and a half years. But the lack of reaction by investors was at least a little surprising. If nothing else, it made clear that attitudes towards the USD are neither uniform nor fixed. Having lead the way on Friday it shared last place yesterday with the CHF, the JPY, the CAD, the SEK and the NOK, losing 0.2% to the EUR. 


Although the EUR pit in a slightly better performance than the USD the gap was not wide. Confusingly, investors paid as little regard to this morning's mostly-respectable services PMI readings as they had to the numbers from the UK and US on Monday. The numbers from Italy and France were disappointing, especially Italy's 49.2 reading which took services into the contraction zone alongside manufacturing. However, Germany and pan-Euroland beat forecast both with services and the composite index; all four numbers were also higher on the month.  


Until the CAD suffered some slippage in London this morning it had been virtually unchanged against the USD. The late decline cost it a net 0.2%.  There were no Canadian economic data to show the way but a speech by Bank of Canada governor Stephen Poloz did at least add some color to the debate. He highlighted the importance of central bankers paying attention to the signals sent by financial markets, observing that "the fact that financial market prices are formed with the discipline that comes from putting real money on the line means that central bankers ignore them at their peril". In essence, Mr Poloz was defending the BoC's decision to take rates higher two weeks ago. His critics are not necessarily appeased.


Britain's services sector PMI was another of the economic statistics to which investors turned a blind eye. At 52.2 it was lower on the month and more than a point below analysts' forecasts. At almost any other time the weaker reading would have resulted in a mark-down for the GBP. But investors are focusing at the moment on what they believe to be an imminent Brexit deal with the EU, even though the government insists that none exists. That optimism worked well again for the GBP on Monday; it strengthened by 0.4% against the USD. Further movement is likely today - in whichever direction - when it becomes clear how the prime minister has fared in an important cabinet meeting this morning.


The USD is practically unchanged on the day against the JPY. There was nothing new from the Bank of Japan to flesh out Monday's hint at a normalization of monetary policy and the only statistic released overnight showed household spending falling by 1.6% in the year to September. 

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