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UK construction PMI expected to strengthen, Fed to release FOMC minutes

business-articlesUK construction PMI expected to strengthen, Fed to release FOMC minutes
  • UK construction activity expected to rise
  • US manufacturing PMI forecast to remain robust
  • FOMC minutes may weaken USD
UK construction activity forecast to have risen in December

IHS Markit will release the UK’s latest Construction PMI later this morning, with an expected uptick in activity in the UK’s building sector last month possibly strengthening the pound.

Analysts are optimistic that the recent strength in residential building will have carried into December, helping to bolster the index.

Conversely a possible dip in activity could damage the pound today and cause it to relinquish some of Tuesday’s gains, with the continued decline in commercial construction projects making this a very real possibility.

However, given that Britain’s construction sector only accounts for a very small portion of the UK’s economic growth the release may have a negligible impact on the pound.

US ISM manufacturing PMI expected to hold steady

After getting off to a lackluster start on the first day of trading in 2018, the US dollar may be able to find its feet later today with the publication of the latest US ISM Manufacturing PMI.

Economists currently predict that December’s reading will show that activity in the US factory sector will have remained robust at the end of 2017, with the index expected to see only a modest dip from 58.2 to 58.1.

However given the larger than expected uptick in the IHS Markit PMI yesterday, there is a possibility that the ISM reading may also beat expectations, something that may help USD to strike higher.

US FOMC minutes may reveal concerns over weak US inflation

The US dollar may be forced to relinquish any potential gains at the end of today’s session as the Federal Reserve publishes the minutes from last month’s FOMC policy meeting.

While the Fed voted to raise interest rates in December, delivering the final of three promised rate hikes in 2017, two FOMC members are known to have opposed the decision due to concerns over stubbornly low inflation in the US.

Investors are likely to pore over the minutes to find out whether any other members of the Fed shared these concerns over weak inflation, with any further voices of dissent over plans to continue the current pace of tightening in 2018 likely to pressure the US dollar.

Investors will also look for a more in-depth outlook from the US central bank on what impact it expects the Republican tax cuts to have on the US economy, with further USD weakness likely if they hold only modest expectations.
Upcoming Data

Wednesday, 3 January, 2018
09:30               GBP Construction PMI
15:00               USD ISM Manufacturing PMI
19:00               USD FOMC Minutes 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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