Stronger vehicle sales in October, lower numbers of jobless claims and a provisional 1.2% quarterly increase in unit labor costs were the positive US statistics on Thursday's list. The other data were rather less helpful: Challenger jobless claims were up, nonfarm productivity growth was only 2.2% in the third quarter after a revised 3.0% in Q2 and construction spending was flat in September as a result of a 0.9% fall in public construction projects. The manufacturing sector purchasing managers' index readings from Markit and the Institute for Supply Management were both lower on the month and below target; Markit's 55.7 was only fractionally short of the mark but the ISM reading fell two points to 57.7. The disappointing numbers held back the USD, as did a continued improvement in investor sentiment, especially after the president claimed to be engaged in trade talks with China.
Markit's manufacturing PMI readings from the euro zone and Germany were at least as disappointing as those from the States. Germany came in at 52.2 and the for euro zone as a whole the number was 52.0. Following on from Tuesday's news that the Italian economy stalled in the third quarter, this morning's PMI was nearly a point lower on the month at 49.2, indicating that manufacturing activity contracted in October. Nevertheless, the improvement in sentiment went a long way to counteracting the softer economic data. The EUR was up by 0.6% against the USD, though it was 0.2% lower on average against the other major currencies.
Canada was also part of the downward trend in manufacturing PMI readings, a point lower on the month at 53.9. Oil prices were lower too, so the CAD was lower on average against the other major currencies. However, the improvement in sentiment worked in the Loonie's favour, as it did even more for the AUD and NZD. The CAD gained 0.5% against the USD. A Reuters poll of 40 currency strategists revealed a consensus that the CAD will be 1.5% firmer against the USD in three months' time and 3.5% higher a year from now.
Two of Wednesday's good-news stories about the GBP were gently debunked yesterday. There is no agreement to allow British banks access to the single market after it leaves the EU and, as suspected at the time, there is no certainty that a Brexit deal will be agreed within three weeks. Also, the UK manufacturing PMI was nearly two points lower at 51.1 for October. Nevertheless, the upbeat sentiment persisted, allowing the GBP to have another broadly successful day. It strengthened by 1.3% against the USD and by an average of 0.3% against the other ten most actively-traded currencies. The Bank of England governor made a contribution to its success with some hawkish comments about interest rates moving higher in the future.
The USD moved 0.2% lower against the JPY, covering a range of less than half a yen. Here again it was it was improved risk-appetite that stifled demand for the JPY. There were no Japanese economic statistics to affect it, and no official statements from the Bank of Japan.