Split down the middle on further delays

5th April 2019 Off By binary

GBP
UK PMI services-sector index failed to meet forecasts and printed the first contraction since July 2016 at 48.9. New orders declined for the third month on the bounce with political uncertainty shouldering the blame. Sterling lost some ground after the data but Brexit developments took precedence, limiting the impact.

Bank of England (BoE) Governor Mark Carney stated that ‘no-deal Brexit’ risks were alarmingly high and Sterling dropped briefly. The EU stated that the Withdrawal Agreement agreement was required for another short-term Article 50 extension. Theresa May’s talks with the Labour Party produced mixed opinions, but expectations of a breakthrough remained low.

The House of Commons passed a Bill forcing Prime Minister May to seek a further Article 50 extension with the EU, and the Speaker’s vote was required to give a majority of just one.  Tensions and uncertainty remain at peak levels as the EU would need to approve an extension at next week’s Summit. This morning the Pound has climbed to near 1.3180 on the Dollar and 1.1725 against the Euro on expectations of a longer Brexit extension and reaffirmations against no-deal.

USD

Markets were in a buoyant mood yesterday morning with global equity indices trading in positive territory. Investors received a boost after Caixin China PMI data sent a strong signal of increasing activity at the end of Q1.

The US ADP data recorded an increase in private-sector payrolls of 129,000 for March compared with consensus forecasts of around 180,000, although there was an upward revision for February to 197,000 from 183,000. The final PMI services-sector index was revised to 55.3 from the flash reading of 54.8. The ISM mon-manufacturing index declined to 56.1 for March from 59.7 previously which was below market expectations of 58.0 and the lowest reading since July 2018. There was a slowdown in business activity and new orders from high levels while employment growth was little changed and prices rose at a slightly faster pace.

The US economy seems to be making a recovery after hitting a recent soft patch. Reports that the US and Chinese officials are meeting to put final touches to an imminent trade deal have encouraged risk-on trading activity. Oil prices extend its gains, posting a fresh five-month high at $62.98. Twitter feeds from the White House has been unusually quiet despite WTI closing on a 38% gain so far this year.

EUR

Yesterday was a more positive day for the EU and the Euro, with PMI figures being revised upward in what will come as a welcome relief for the region. French and German PMI services sector indices for March were up which indicated demand for services and lent support to the single currency. German ten-year yields moved back above zero. There were, however, still some underlying causes for concern which seemed to stall any significant Euro momentum. Italian GDP forecasts are expected to be revised lower and German factory orders missed their mark quite significantly.

Today sees German factory orders (as mentioned above), the French March budget and Spanish bond auction numbers. Most of this data will not cause too much volatility and despite the factory orders missing their mark, currencies have remained fairly stagnant. The European Central Bank’s (ECB) MPC accounts are due at 12.30 which will keep traders interested.

 

Data to watch

06:00 EUR Factory Orders s.a. (MoM) (Feb) (Germany)
11:30 EUR ECB Monetary Policy Meeting Accounts
12:30 USD Continuing Jobless Claims (Mar 22)
12:30 USD Initial Jobless Claims (Mar 22)
14:00 CAD Ivey Purchasing Managers Index (Mar)
14:00 CAD Ivery Purchasing Managers Index s.a. (Mar)
17:00 USD Fed’s Mester speech
20:00 USD Fed’s Williams speech
21:30 AUD AiG Performance of Construction Index (Mar)
23:30 JPY Overall Household Spending (YoY) (Feb) 

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