Day Ahead: Investors May Focus on BOE, Fed, and Global PMIs

Yesterday, the Federal Reserve delivered its interest rates decision. While Powell lowered interest rates as he had predicted, investors believe that he did not do well enough. His statement that the rate cut was just a “mid-cycle adjustment to policy” disappointed investors who expected the bank to start a more aggressive cycle of easing. Therefore, this decision led to a sharp decline in US stocks and a sharp rise on the US dollar. This decision will be the highlight of the day as global investors react.

The Bank of England will conclude its two-day meeting today. Unlike the Fed which slashed interest rates, the BOE is expected to leave rates unchanged. Traders will want to see whether there is a change in the policy. In the most recent decision, the bank said that it would likely hike interest rates if the country leaves the EU with a deal.

As the month starts, investors will receive important PMI data from around the world. This data is a measure on how well the manufacturing sector is doing. A PMI number that is below 50 is usually a sign that the economy is easing while a PMI number of above 50 is a sign that the manufacturing sector is doing well. Earlier today, data from China showed that the manufacturing PMI for July was slightly better than expected. The PMI of 49.9 was better than the previous 49.4. In Australia, the AIG manufacturing PMI data rose to 51.3, which was better than the consensus estimate of 49.4. In Japan, the PMI declined to 49.4 from the previous 49.6.

In Sweden, investors expect the manufacturing PMI to decline to 50.5 from the previous 52.0. In Poland, the PMI is expected to decline to 48.0 while in Switzerland, the PMI is expected to decline from 47.7 to 46.5. For Germany, the biggest economy in Europe, the PMI is expected to remain unchanged at 43.1 while in Italy, it is expected to decline slightly from 48.4 to 48.0. In the United Kingdom, the PMI is expected to decline from 48.0 to 47.7.

A day after the Fed disappointed the market, investors will receive a number of key data from the U.S. The ISM manufacturing PMI is expected to increase from 51.7 to 52.0. The ISM manufacturing employment is expected to decline from 54.5 to 53.4. The construction spending is expected to increase slightly by 0.5% from the previous decline of -0.2%. The US will also release the jobless claims. Initial claims are expected to increase by 212k while the continuing claims are expected to increase to 1.678M. This data will come a day before the country is expected to release the official employment data.

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