Forecast: US manufacturing slows; ADP employment increases

NEW YORK (Forex News Now) – Key data on the estimated change in the number of employed people, excluding the farming industry and government, is due to be published in one of the day’s major realtime forex news events.

The US manufacturing ISM is forecast to show a slight decline (from 56.9 to 56.5) in November after a significant increase in October. Forecasts for the ADP employment report predict a 72,000 increase in private employment, significantly up from last month’s 43,000 increase.

Recent economic evidence from the US wasn’t that bad and this might be confirmed by today’s data. Already for quite some time we indicated that the combination of reasonably strong US economic data and additional support from the Fed after the decision on QE-2 might become dollar supportive short-term.

The dollar recently indeed regained ground, but this was obviously for other reasons. So, it will be interesting to see whether US economic data will be able to turn the market focus away from the sovereign debt crisis in Europe. Even if this would be the case, the question is what this would mean for EUR/USD trading.

Recently, dollar-strength was in the first place a risk aversion trade, rather than a positive call on the US economy. So, the jury is still out what would be the reaction in EUR/USD if this week’s US data would be able to improve global risk sentiment for the better. Of course at this stage, this is nothing more than hypothetical thinking. Until further notice, the focus of markets remains on the EU sovereign crisis.

EMU PMI expected to confirm increase

In the euro zone, the final figure of euro zone manufacturing PMI is forecasted to confirm the first outcome, which showed an increase from 54.6 to 55.5, as the improvement was confirmed by the German Ifo and European Commission confidence indicators.

The EMU countries national data is expected to show a significant disparity between the core-EMU and weaker peripheral countries. In the UK, manufacturing PMI is expected to show a marginal decline in November (from 54.9 to 54.7) after remarkable upward surprise in October.

The final reading of the EMU PMI’s will probably bring no big surprise. However, markets will keep a close eye on the details of the peripheral countries.

UK housing prices

This morning, the Nationwide House prices in the UK came out at -0.3%M/M and 0.4% Y/Y. This was close to expectations. However, sterling is ceding some ground against the euro this morning. This should in the first place be considered as a retracement of yesterday’s sharp decline in EUR/GBP.

In a longer term perspective, we are not convinced on the need of a further big recovery of sterling against the euro from the current levels. However, as long as the negative headlines from Europe keeping coming in, we also don’t row against the tide in this cross rate. The PMI of the manufacturing sector in the UK is interesting, but we expect the impact of release only to be of intraday importance.

Content provided by: KBC Bank