• The Fed have kept interest rates on hold as was widely expected
  • ADP rises to 235k for October
  • ISM misses forecasts and drops to 58.7
  • Brent Oil pulls back from yearly high despite DOE draw
  • UK manufacturing beats forecasts ahead of “Super Thursday”

As was widely expected the Fed funds rate has been kept at its present level of 1.0-1.25% following the conclusion of the latest policy meeting. There are no real fireworks here with the statement not deviating far from the previous version. It appears that a December hike remains probable. The market reaction has been fairly muted with no clear moves seen since the announcement.

The ADP employment report has seen a stronger than expected reading, with 235k US jobs added during the month of October. The reading is a nice beat on the 202k expected and a solid improvement on the prior reading. Last month’s data was negatively impacted by the hurricanes and the initial reading of 135k has been subsequently revised down to 110k. 

The second important economic release of the afternoon from the US has come in as something of a disappointment, with the ISM manufacturing PMI missing consensus forecasts. A reading of 58.7 for October is still strong by historical standards but against an expected 59.5 and a prior reading of 60.8 the release could be described as a mild negative surprise. Whilst the USD has shown a little weakness since the release there has been a bigger move in precious metals with both Gold and Silver rising strongly into the European close

The weekly DOE inventories have shown a decrease once more after last week’s unexpected surprise. A fall of 2.4M is larger than the consensus forecast for a drop of 1.5M and compared to last week’s build of 0.9M is a sign that US stockpiles may be set to resume their recent downtrend. The market reaction which has seen some initial selling in Oil, with Brent dropping back below the $61 handle. 

The UK manufacturing sector continues to perform well, with the latest data coming in better than expected. The PMI index for October rose to 56.3 against consensus forecasts for a reading of 55.8 after a previous reading of 55.9. The number is the third highest of the year and provides further evidence that the sector continues to perform well despite the looming threat of Brexit. 

Having said that, traders will be awaiting tomorrow’s “Super Thursday” when the BoE rate decision coincides with the quarterly inflation report for further hints as to the longer term direction for the pound. The bank are expected to increase rates for the first time in a decade, but will it be a dovish or hawkish hike?