Saxo Bank Head of FX Strategy John Hardy reports that the euro continues its ascent despite Italian yields continuing to rise with key EURUSD flashpoints at 118.25, 119.25, and of course 1.20.
Article / 02 July 2013 at 5:05 GMT

3 Numbers to Watch: UK construction, EU PPI, US factory orders

editor/analyst /
United States

Today's update on the mood in Britain’s construction sector will be closely watched for additional evidence that the UK economy’s revival is gaining momentum. Meanwhile, the May report on Eurozone producer prices offers another data point for weighing disinflation/deflation risks. Later, US factory orders will provide a broad measure of the manufacturing sector in May.

Markit/CIPS UK Construction PMI (08:30 GMT): Recent economic reports for Britain have been upbeat and today’s release for the construction sector is expected to bring another round of modestly encouraging news. The overall trend still looks a bit wobbly, but the modest bias for growth across a range of indicators can't be denied. Yesterday's better-than-expected CIPS Manufacturing PMI release, for instance.

Analysing what appears to be a change for the better in the broad trend will no doubt be at the top of the agenda for Mark Carney, who formally took charge of the Bank of England (BoE) this week. Britain's central bank has tolerated consumer price inflation above its two percent target for several years, on the assumption that higher pricing pressures are productive when the economy is weak if not contracting. But with the UK showing persistent signs of moderate growth lately, it’s only natural to wonder if the central bank will continue to let inflation run above target.

Much depends on whether Carney and company are convinced that there’s a sustainable period of growth in the cards for the UK in this year's second half. Today’s release on construction activity for June won't be a definitive signal, one way or the other. That said, another reading above the neutral 50 mark would strengthen the view that residential construction has emerged from its slump and is once again a positive for the economic outlook. If the crowd’s expectation for more good news today pans out, the data is likely to be included in the talking points when Carney chairs his first meeting of policymakers that begins tomorrow.


Eurozone Producer Prices (09:00 GMT): Is disinflation/deflation risk strengthening? That’s a debatable topic at the moment, thanks to the recent news that consumer prices reversed course in yesterday’s flash estimate for June. Eurozone prices inched higher on an annual basis for the second time in as many months to 1.6 percent. That eases any immediate fears about disinflation/deflation, although the market will be keenly interested in learning if today’s report on industrial prices for May offers a similar narrative.

The annual rate of producer prices slipped into negative territory in the previous release, although analysts think we’ll see outright deflation ease a bit with the May year-over-year rate moving closer to zero. In that case, the darkest fears about deflation will ease. But any celebration will be muted. A relatively stable run in overall pricing, if in fact that’s what we now have, is certainly welcome at this stage. Unemployment keeps rising, however. Eurostat reported yesterday (pdf) that the jobless rate for the Eurozone inched higher again, touching 12.1 percent in May—another record high. Disinflation/deflation may no longer be a pressing threat, but the recession in Europe overall rolls on. With that in mind, a downside surprise in today's PPI report would raise new questions about the notion that inflation is stabilizing.


US Factory Orders (14:00 GMT): Today’s report may receive more attention than usual as the market looks to the hard data for insight into how the manufacturing sector is holding up. Last week’s upbeat release on new orders for durable goods for May suggests that the full report for all manufacturers will follow suit. The consensus forecast sees a two percent rise for factory orders overall, or twice as strong as April’s gain.

Manufacturing activity has been sluggish lately, although yesterday’s news of a stronger-than-expected return to modest growth in the June ISM Manufacturing implies that this corner of the economy will continue to expand through the summer. That was also the message in the flash estimate of the June Manufacturing PMI data. A decent rise in today’s report on factory orders, which is likely, would further strengthen the view that the recent weakness in manufacturing was noise and not an ominous signal for the business cycle.



The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail