he main EUR/USD pair has barely moved an inch in the past week or so, with last week’s typically quiet Thanksgiving holiday period ensuring that the cross was kept pinned just above the 1.10 level. Volatility was, however, back with a vengeance yesterday, primarily a result of some very downbeat macroeconomic data out of the US economy.

Monday’s US manufacturing PMI from ISM fell short of expectations, with activity in the sector falling deeper into contractionary territory from 48.3 in October to 48.1 in November. To compound the misery for the greenback, construction spending also declined sharply in October, falling by 0.8% month-on-month, its second-largest drop in 2019.

We also had some slightly more upbeat data out of the Eurozone earlier in the day, with the latest manufacturing PMI from Markit showing signs of a modest improvement. The index ticked back up to 46.9 in November from 46.6. While the uptrend is undoubtedly a welcome one for officials at the European Central Bank, it remains well short of levels that policymakers would desire.

Trade developments are likely to be the talk of the town in the FX markets today, particularly after the news yesterday that the US could impose fresh tariffs on metal imports from Argentina and Brazil. Aside from that, we await Wednesday’s US non-manufacturing PMI from ISM for any clues as to whether the slowdown in the manufacturing index is symptomatic of a more systemic downturn in the world’s largest economy.

Pound jumps higher on fresh election poll

Sterling also moved higher against most of its major peers this morning, rallying to just shy of the 1.30 mark against the US dollar amid further signs that the Tory Party were heading for a comfortable election victory next week.

The latest opinion poll released from Kantar showed another solid lead for the Tories of 12% over Labour. A broadly weaker US dollar also helped lift cable on its way, with the pair now just-shy of its higher level since May 2019. At this stage, we think that a majority victory for the Conservative Party is now largely priced in, although there remains scope for at least a small move higher.

Yesterday’s construction PMI went largely under the radar, unsurprising given the sector’s small contribution to overall GDP. Tomorrow’s services index may take on more importance, although with this month’s election now only nine days away, it may also get lost in the political headlines.