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What’s happening: The British pound fell on Friday, as investors assessed the latest economic data.
What happened: Investor sentiment towards the sterling was hit by business output in the UK falling for the first time in over a year in November.
Both manufacturing and services PMI as well as retail sales data exerted pressure on the sterling.
Why it matters: Data released on Friday showed UK’s preliminary S&P Global flash composite PMI (Purchasing Managers’ Index) declining to 49.9 in November, from October’s reading of 51. This was the first time in 13 months that business output in the country fell below the 50.0 mark.
UK’s services PMI fell to 50 in November, from 52 in the previous month. The figure came in below market expectations of 52. Manufacturing PMI declined to 48.6 in November, from 49.9 in October. The October reading had been the first contraction in the country’s manufacturing activity in seven months.
UK’s retail sales volumes fell by 0.7% in October, more than market expectations of a 0.3% decline. This also marked the steepest decline since June.
The UK government raised taxes by £40 billion with finance minister Rachel Reeves increasing taxes on wealthy foreigners and businesses.
Meanwhile, UK’s annual inflation rate rose to 2.3% in October, reaches the highest in six months. The figure was much higher than the 1.7% recorded last month and surpassed market estimates of 2.2%.
Strength in the US dollar also 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 107.49 on Friday.
The GBP/USD fell more than 0.4% to 1.2530 on Friday, after hitting its lowest level since May earlier in the session.
The sterling rose slightly versus the euro, with weak PMI data coming from the Eurozone. The EUR/GBP forex pair fell to 0.8319 on Friday.
What to watch: Investors will watch more economic reports from the UK, as continued weakness in the economy may force the Bank of England to slash interest rates at a faster pace.
Context: Equity markets in the US closed higher on Friday, with the Dow Jones index surging more than 400 points.
Details: All three major US stock indices recorded gains last week, as investors monitored data signalling upbeat economic activity in the country.
The S&P Global composite PMI surged to 55.3 in November, from 54.1 in October, recording the strongest growth since April 2022. US manufacturing PMI rose to 48.8 in November, from 48.5 in the previous month, while services PMI improved to 57 in November, from 55 in October.
The small-cap Russell 2000 index gained 1.8% on Friday, recording a weekly surge of 4.3% and settling at its strongest level in more than a week.
Gap’s stock surged around 13% on Friday, after the company raised its annual sales outlook. Super Micro Computer’s stock surged 12% on Friday, after Nvidia named the company as a partner during its earnings call. Shares of online vehicle auction and remarketing services provider Copart gained almost 11% after the company reported massive revenue growth in the latest quarter.
Industrial stocks were among the top performers, gaining around 1.4%, while consumer discretionary stocks bucked the overall market sentiment, declining about 0.7% during the session.
The Dow Jones index jumped 426.16 points, or 0.97%, to close at 44,296.51 on Friday. The S&P 500 gained 0.35% to 5,969.34, while the Nasdaq 100 added 0.17% to settle at 20,776.23. For the week, the Dow Jones index rose 1.96%, while the S&P 500 added 1.68%.
What to watch: Investors await the release of economic data on Chicago Fed National Activity Index (1730 UAE Time) and Dallas Fed Manufacturing Index (1930 UAE Time) from the US today.
The Chicago Fed National Activity Index, which fell to -0.28 in September, is expected to improve slightly to -0.15 in October. Analysts expect the Dallas Fed manufacturing index to rise to 1 in November, from a reading of -3 in October.
Other Markets: Asian indices traded higher today, with Japan’s Nikkei 225, China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index up by 1.38%, 0.31% and 0.15%, respectively.
US President-elect Donald Trump’s top security advisor Mike Waltz urged for a “responsible end” to the ongoing war between Russia and Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.
The People’s Bank of China kept its one-year medium-term lending facility unchanged at a rate of 2.0%, lending support to the CNY/USD forex pair.
New Zealand’s retail sales slipped by just 0.1% in the third quarter, compared to a sharper 1.2% plunge in the previous quarter, which sent the NZD/USD pair higher in forex trading this morning.
Saudi Arabia’s trade surplus narrowed to SAR 18.7 billion in September, from SAR 43.3 billion in the year-ago month, exerting pressure on the SAR/USD forex pair.
Argentina’s economic activity estimator fell by 3.3% year-over-year in September. This being less than the 3.7% decline in the previous month sent the ARS/USD pair slightly higher in forex trading this morning.
Spain’s producer prices (1200 UAE Time), Germany’s Ifo business climate (1300 UAE Time), Ifo current conditions (1300 UAE Time) and Ifo expectations (1300 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time), current account (1530 UAE Time), foreign direct investment (1330 UAE Time) and Brazil’s Central Bank focus market readout (2200 UAE Time), Canada’s manufacturing Sales (1730 UAE Time), as well as Mexico’s current account (1900 UAE Time).
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