Sterling suffers as PMI falls

Following the positive manufacturing purchasing managers index (PMI) in the UK, the UK construction PMI was rather disappointing, falling to 51.6 in October, down from 53.8 in September. The figure, which was below expectations of 53, and an 8-month low, dealt an early morning blow to Sterling yesterday.

In the Eurozone, manufacturing PMI was revised up to 54.6 for October, up from 54.1 in September. When the figures are broken down Germany's led the way at 56.6, while Italy's growth stabilized at 53.0, France slipped to 55.2 and Greece remained in contraction territory as PMI fell to 43.6. Despite the variances, the headline PMI figure from the Eurozone enabled the Euro to gain a 1% on Sterling yesterday morning.

Overnight the US mid-term elections surprised most political commentators as the Democrats held onto the Senate, but lost the House of Representatives. Although not all results are in, the results may see President Obama watering down his reform programmes and impose fiscal constraints sooner rather than later.

Following the mid-term results there was not much movement in the financial markets so focus now shifts to UK services PMI and the US non-manufacturing institute of supply managers (ISM) figure for October. For foreign currency traders buying Euros or selling Euros, the chances are that Sterling and the US Dollar could well be stronger against the Euro following this data.

With the US mid-terms out of the way now, the focus shifts to Central Bank decisions with the Bank of England, European Central Bank and US Federal Reserve all making their policy decisions in the next 24 hours.

The Fed's decision comes first at 1815 tonight and it is widely expected they will sanction a further round of quantitative easing. We will have to wait and see if the BoE and ECB follow suit.