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What’s happening: The British pound recorded losses against the US dollar on Monday, with investors adding more safe havens amid elevated geopolitical tensions.
What happened: The greenback moved higher during Monday’s session as the US economy fared better than market expectations.
The euro also edged higher against the sterling but remained close to its weakest level in two-and-a-half years.
Why it matters: The US dollar has been on a downtrend this year, with the Federal Reserve adopting a dovish stance. The greenback started the week on a positive note after the US released strong economic data, which suggested that the Fed could be less aggressive in cutting interest rates.
Data released last week showed US retail sales growing by a faster-than-expected 0.4% in September, while initial jobless claims declined by 19,000 to 241,000. The data releases resulted in markets moderating their rate cut speculations.
Strength in the US dollar exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.5% to 104.01 on Monday.
The UK also released positive data last week. Inflation in the country eased more than anticipated to 1.7% in September, from 2.2% in the previous month. This marked the lowest inflation rate since April 2021. The latest reading was also below the Bank of England’s target level of 2%, which fuelled speculations of policymakers announcing deeper rate cuts ahead.
Markets widely expect the BoE to cut its benchmark interest rate from 5% to 4.75% at the November meeting. Goldman Sachs released a report predicting UK’s interest rates to be reduced to as low as 2.75% by autumn 2025.
The GBP/USD forex pair fell around 0.5% to 1.2985 on Monday, slipping close to two-month lows of 1.2975.
The EUR/GBP edged higher by 0.04% to 0.8331 on Monday but remained near its lowest level in 2.5 years. The sterling has performed better than the euro due to a weaker-than-expected performance by the Eurozone economy.
What to watch: Remarks from Bank of England Governor Andrew Bailey will remain in focus today. Manufacturing and services PMI data for October will be released on Thursday. The S&P Global UK manufacturing PMI, which declined to 51.5 in September, is expected to edge lower to 51.4 in October. Analysts expect the country’s services PMI to remain unchanged from the previous month at 52.4 in September.
Context: SAP’s shares moved higher in after-hours trading, following the release of the company’s third-quarter results.
Details: SAP reported revenues of $9.16 billion for the third quarter, just shy of Wall Street expectations of $9.17 billion. Adjusted earnings came in at $1.33 per share, topping consensus estimates of $1.32 per share.
Growth in cloud revenues resulted in the company increasing its guidance for the full year. SAP said cloud revenues surged 25% to €4.35 billion during the third quarter, while Cloud ERP Suite revenues grew 34%.
The company reported a current cloud backlog of $16.66 billion, representing a 25% gain.
SAP’s CEO Christian Klein said that a “significant part” of the cloud deals in the third quarter included AI use cases. The company is making “strong progress on Business AI with groundbreaking innovations such as SAP Knowledge Graph,” he added.
Management raised their 2024 projections for adjusted operating profit to between €7.8 billion and €8.0 billion, from their previous forecast of €7.6 billion to €7.9 billion.
They also raised the cloud and software revenue guidance for the year to a range of €29.5 billion to €29.8 billion, from the previous outlook of €29.0 billion to €29.5 billion.
How shares responded: SAP’s shares gained 3.5% to $237.61 in extended trading hours on Monday following the release of quarterly results. The stock has added around 53% year to date.
What to watch: Investors will continue monitoring overall cloud spending by companies, which could provide a significant boost to SAP’s overall results ahead.
Other Markets: European indices closed lower on Monday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 1%, 1.01% and 0.66%, respectively.
Ukrainian officials said Russia continued drone attacks on Kyiv for the second straight night on Monday. The news sent the RUB/USD slightly lower in forex trading this morning.
New Zealand’s trade deficit narrowed to NZ$2.1 billion in September, from a year-ago gap of NZ$2.4 billion. Despite this, the NZD/USD forex pair remained under pressure.
South Korea’s producer inflation eased to 1% year-over-year in September, from 1.6% in the previous month, which sent the KRW/USD pair higher in forex trading this morning.
Greece’s current account surplus widened to €0.65 billion in August, from €0.48 billion in the year-ago period. This being the largest surplus since January lent support to the EUR/USD forex pair.
Colombia’s trade deficit increased to $1.688 billion in August, from $1.344 billion in the year-ago month. However, the COP/USD pair rose in forex trading this morning.
European Union’s new passenger car registrations, UK’s public sector net borrowing, South Africa’s leading business cycle indicator, Mexico’s economic activity, Canada’s producer price inflation and raw materials price index, US Redbook index, Richmond Fed manufacturing index, Richmond Fed services revenues index, as well as China’s foreign direct investment.
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