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The Marketplace - April 7th 2015
07/04/2015
UK markets open this morning after the 4-day Easter long weekend, sterling looks to be starting he week on a high note, at least versus the US dollar as a slew of data from the US over the course of the long weekend looks to have cut the dollar’s rally short across the board.
The Reserve Bank of Australia kicks off the day announcing that it has kept its cash rate target at 2.25 percent, in line with forecast. We are expecting key releases from the Eurozone as well as the UK in the form of Services PMI.
UK
A monthly survey released the Confederation of British Industry (CBI) earlier today showed that the UK’s economy grew by 0.7 percent in the three months leading up to March. The survey showed that firm expect growth to continue in the coming months with a pickup in business and consumer services and that the main risk to the UK economy was related to ongoing Eurozone worries.
This morning we are expecting Services PMI data, where little change is expected in the March report. The indicator continue to trade above the key 50-point mark which is an indication of expansion in the sector. Forecasts this month are for a slight increase to 57.1. The remaining highlights will come later this week as we expected the most recent Trade Balance figures due for release on Thursday. The deficit narrowed to GBP -8.4 billion in January, much lower than forecast. Expectations for the month of February are for GBP -9.7 billion.
The Bank of England will also be in focus later this week as the MPC is scheduled to release the monthly interest rate decision. No change is expected to the 0.50 percent benchmark rate. We will close the week with a final key release in the form of Manufacturing Production, the market will be watching this release closely as a disappointing data in January showed a decline in the sector of 0.50 percent, well below estimates of an increase of 0.20 percent. Any major deviations from the forecasts this month could prompt some volatility in the GBPUSD pairing.
US
The dollar started off the week on the back foot as Non-Farm Payroll data on Friday last week majorly disappointed and showed a gain of only 126K jobs, which was not only 120k worse than expected, but also the smallest gain since the December of 2013. Employment continued its upward trend in professional and Business service as well as health care and retail sectors. While primary sectors such as mining lost ground. Employment in other major industries, including construction, manufacturing, wholesale trade, transportation and warehousing, information, financial activities, and government, showed little change over the month.
As the disappointment around the poor labour data fades the market will now turn its focus to a few key data releases this week. First up will be the US FOMC meeting minutes on Wednesday which is the first meeting after the committee removed the word ‘patience’ from its forward. Unemployment claims are also due later in the week. The number of new claims filed for unemployment benefits in the US declined considerably last week to 268,000 from 286,000 in the week before. The 20,000 fall reasserts the positive trend in the US labor market. Analysts expected only a minor drop in the number of claims. The number of people continuing to receive jobless benefits declined by 88,000 to 2.33 million. The number of claims is expected to reach 271,000 this week.
Euro
The Greek issues will still weigh heavily on the euro the week despite promising news that the Government will meet the IMF’s looming repayment deadline. Today we will see services PMI data from Italy and Spain as well as the final figure for the region. Services PMI’s showed growth for the most part in February and the market expects this to continue with scores above 50 points once again.
German Factory order, which can have a significant impact, is forecast to show and advance of 1.5 percent in February, following a disappointing drop of 3.9 percent in January. Retail PMI and Sales will also have an impact on the euro and it’s major currency counterparts. Retail PMI has been stuck under the 50 point mark for some times and there are no expectations for growth in this sector. Retail sales on the other hand have been promising and posted a gain of 1.1 percent in January. A slight slide of 0.1 percent is forecast in February.
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