Weak PMI Data Send the Euro Lower, CAD Steady Ahead of BoC Rate Statement

Market Reviews

The euro falls significantly after today’s PMI reports, which turned out to be weaker than expected. Eurozone PMI manufacturing fell to 52.1 in October, down from 53.2 and missed forecast of 53.1. That’s a 26-month low. PMI services dropped to 53.3, down from 54.7 and missed expectation of 54.5. That’s a 24- month low. PMI composite dropped to 52.7, down from 54.1, hit a 25-month low.

Also released today, Germany PMI manufacturing dropped to 52.3 in October, down from 53.7 and missed expectation of 53.5. That’s a 29-month low. PMI services dropped to 53.6, down from 55.9 and missed expectation of 55.5. That’s a 5-month low. PMI composite dropped to 52.7, down from 55.0, hit a 41-month low. France PMI manufacturing dropped to 51.2 in October, down from 52.2 and missed expectation of 52.4. That’s also a 25-month low. PMI services rose to 55.6, up from 54.8 and beat expectation of 54.7, and hit a 4-month high. PMI composite rose 0.3 to 54.0.

European stocks recoiled strongly today. FTSE gained 1.28%, DAX increased by 0.91%, CAC rose by 1.44%. Earlier today, Nikkei gained 0.37%, Singapore Strait Times rose 0.02%, China Shanghai SSE grew 0.33% to 2603.30, but Hong Kong HSI declined by 0.38%.

Canadian dollar remains firm in anticipation of the Bank of Canada rate statement. Markets expect, that the BoC, headed by Governor Stephen Poloz, will raise interest rates from 1.50% to 1.75%. This will be the third increase this year, and the fifth increase since last year. The decision will be accompanied by new economic forecasts, which are likely to show improvement.

Donald Tusk (European Council President) said EU is ready to extend the transition period after Brexit in March, if UK requests for it. Nonetheless, Tusk also said “I stand ready to convene a European Council, if and when the Union negotiator reports that decisive progress has been made”, referring to the possibility of an extra summit on November 17-18.