UK data released yesterday better than expected

There was some better than expected UK data yesterday with the October manufacturing PMI coming in above expectations at 54.9 against the markets forecast of 53. The data dealt another blow to Bank of England monetary policy committee member's that have been advocating for further quantitative easing.

This welcome, if somewhat unexpected, increase in PMI suggests that the manufacturing sector continues to do quite well as hopes for UK GDP growth in Q4 will show further resilience as we head towards year end. With the VAT rise in 2011, growth at the start of next year could well slip back as spending cuts start to bite.

The news has continued to boost Sterling as it becomes apparent that whatever the Federal Reserve do on Wednesday, the Bank of England will maintain the status quo on monetary policy for another month.

The US Dollar had a decent day yesterday, pulling back lost ground against the Euro after October ISM manufacturing data came in at 56.9 against expectations of 54. With US mid-term elections today and the Federal Reserve starting their two day meeting it would appear that any US Dollar respite will be short-live as the Federal Reserve looks to embark on a fresh round of quantitative easing at the conclusion of its meeting tomorrow.

Overnight the Reserve Bank of Australia increased interest rates by 0.25% to 4.75% which, although expected by the market, still led to some Aussie dollar strength, pushing Sterling back down to £/AUD 1.60. The RBA reasoned that stronger growth out of China would cause upside risks to inflation so the move was "pre-emptive" to keep a inflation under control.

Today UK October construction and European PMI data are released.