he US dollar index is currently trading at its highest level since May 2017, buoyed by some generally weak macroeconomic data and ultra accommodative monetary policy elsewhere. A downturn in global data and concerns over the escalating US-China trade war has caused most major central banks to turn dovish, none more so than in Australia. Australia’s central bank, the RBA, cut rates as expected for the third time in the current cycle to a fresh record low 0.75% overnight. The rhetoric of RBA governor Lowe, in which he noted slower jobs growth and inflation, suggests that more easing may be on the cards in the coming months.

The aforementioned slowdown in global data has been particularly prevalent in the Eurozone. We had more evidence that a further slowdown was likely on Monday with a host of data releases falling short of expectations. German retail sales missed their mark, while second quarter growth in Spain was revised lower from the preliminary estimate. There were also signs of a complete lack of inflationary pressure in Germany, with the main consumer price index flat month-on-month in September.

Such soft data does not bode particularly well for this morning’s Eurozone wide inflation numbers. Any downside surprises either here or in the revised manufacturing PMI data, could trigger another bout of euro weakness. The common currency has sold-off hard in the past few weeks and is now trading back below the 1.09 level.

Pound hovers around 1.23 mark ahead of UK PMIs

Sterling spent much of yesterday pinned to the 1.23 level against the dollar, with investors still none the wiser as to the next steps for Brexit. Investors had little news on the subject to digest on Monday, other than accusations that PM Boris Johnson was facing a financial conflict of interest over Brexit.

Absent any significant developments on the Brexit front this week, attention in the UK could turn to macroeconomic data. Monday’s GDP numbers for the second quarter were revised modestly higher, with the economy growing by 1.3% year-on-year versus the 1.2% estimate. The more timely PMI measures of business activity for September could take on more significance in the next couple of days. This morning’s manufacturing and tomorrow’s construction PMIs are expected to remain below the level of 50 that denotes contraction. While clearly a warning sign regarding UK growth, the real test will be Thursday’s services index, given its much larger contribution to overall output.

The PMIs will be released at 9:30am UK time, Tuesday through to Thursday.