Sunak to be appointed as PM.

The Euro-Zone manufacturing index declined to a 29-month low of 46.6 for October from 48.4 in September and below expectations of 47.8 while the services-sector index declined slightly to 48.2 from 48.8 and a 20-month low, but in line with market expectations.

There was a sharp slowdown in new orders growth while business confidence remained weak. Supply-side shortages eased, but there was still strong upward pressure on prices with much stronger than pre-pandemic inflation pressures. The data reinforced unease over the Euro-Zone outlook.

The US PMI manufacturing index retreated to a 28-month low of 49.9 for October from 52.0 the previous month and below consensus forecasts of 51.0. The services-sector index dipped to 46.6 from 49.3 and significantly below expectations of 49.2. This was a two-month low for the index and the fourth successive reading below the 50.0 level. New orders edged back into contraction territory with a sharp decline in exports.

There was a slightly increased cost burden, but output charges increased at the slowest rate since December 2020.Significantly, there was a sharp decline in business confidence for the month to the lowest level for over two years and one of the weakest readings on record.

Despite the weaker than expected US data, Treasuries were unable to make further headway and the 10-year yield settled slightly higher just above the 4.20% level.

Higher yields limited the scope for significant dollar selling during the day.

After being the only valid nominee in the Conservative Party election, former Chancellor Sunak will formally be appointed as Prime Minister on Tuesday.

The latest UK PMI business confidence data recorded a decline in the manufacturing sector to a 29-month low of 45.8 from 48.4 previously and below consensus forecasts of 47.9. The services-sector index also posted a 21-month low of 47.5 from 50.0 and also below market expectations of 49.6.

There was a slide in new orders on the month and overall business confidence slumped to 30-month lows amid underlying fears over the outlook.

There was a net easing of cost pressure and the rate of increase for prices charged retreated to the lowest level since August 2021.

Swiss sight deposits posted another sharp decline to CHF597.6bn in the latest week from CHF619.8bn the previous week and the fourth successive sharp decline in deposits as the National Bank continued to drain liquidity from domestic money markets.

Confidence in the Euro-Zone economy remained fragile after the weaker than expected PMI data with on-going recession expectations. EUR/USD dipped to lows just above 0.9800. EUR/USD rallied as US reservations were also a significant element during the day. The decline in gas prices provided an element of Euro relief. EUR/USD failed to challenge 0.9900 amid higher US yields and settled around 0.9875.

The yen regained some ground with jitters over the threat of further Bank of Japan intervention. USD/JPY settled just below 149.00 with no actual intervention reported.

The Swiss franc declined despite a further drain in liquidity. EUR/CHF rallied to near 0.9900 while USD/CHF edged above parity.

Sterling failed to hold gains amid fears over the UK economic outlook. An easing of political uncertainty also failed to provide further UK currency support. GBP/USD retreated steadily to below 1.1300 before stabilising below this level.

Commodity currencies were subjected to choppy trading despite gains in equities. AUD/USD did find support below 0.6300 with a tentative rally to 0.6330. USD/CAD settled just above 1.3700 with buying interest below this level.

Economic Calendar