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NonFarm Payrolls “steel” the show

NonFarm Payrolls “steel” the show

GBP
Snow and uncertainty contributed to UK Services PMI figures falling sharply from February’s 54.5 to 51.7 in March. This was the worst result since July 2016 and well below consensus forecasts of 53.8. Although employment growth slowed there was evidence of increased inflation in input prices and output charges. Inflationary pressures will maintain the case for a Bank of England rate hike despite subdued spending and growth concerns.

Sterling was relatively resilient despite disappointing data as UK bond yields moved higher, although there were net currency losses with a test the 1.4000 support against the Dollar while the Euro homed in on 1.1435.

USD

The Dollar is higher against its peers for the backend of this week with expectations of a strong NonFarm payrolls report today and optimism surrounding the trade war as Trump has expressed a willingness to negotiate. The US and China will ultimately seek to make a deal in the interest of the global network to prevent dampening growth. That said, China has made it clear they would strike the US back “to the end, and at any cost”.

Another rising story in the US yesterday was the trade deficit has now increased for the sixth straight month and near a 9.5-year high in February at $57.6 billion. Both exports and imports rose to record highs.

The main headline today for the Dollar will be the Non-Farm payroll report, indicating the job creation ability of the US economy. Investors should be aware of the market seeking mostly clues for wage growth whilst the unemployment rate is also due, so the summary of the report might be mixed. The Dollar has made gains on these expectations to push to lows of 1.3977 for Cable and 1.2219 against the Euro.

EUR

The Euro is slightly weaker overnight and has fallen to the lower end of its recent range versus the US Dollar as the economic data continues to point to a slowdown in both domestic and external demand, albeit from elevated levels. Businesses ended the first quarter with their weakest expansion since the start of 2017 as snowy weather and a strong currency combined to curb growth in new orders.

The sharp pullback in the German 10-year yield in March indicates the markets have scaled back expectations of European Central Bank (ECB) tightening. Further, Italian political uncertainty could play spoilsport. The Italian-German yield spread will likely widen, pushing the common currency lower if the far-right Lega warms to overtures from the anti-establishment 5-Star Movement to form a coalition government in Italy.

Data to Watch:

07:00 EUR Industrial Production n.s.a. w.d.a. (YoY) (Feb)
08:45 EUR ECB Cœuré Speech
13:30 USD Nonfarm Payrolls (Mar)
13:30 USD Average Hourly Earnings (YoY) (Mar)
13:30 USD Unemployment Rate (Mar)
13:30 USD Labor Force Participation Rate (Mar)
13:30 USD Average Hourly Earnings (MoM) (Mar)
13:30 CAD Net Change in Employment (Mar)
13:30 CAD Unemployment Rate (Mar)
15:00 CAD Ivey Purchasing Managers Index (Mar)
15:00 CAD Ivey Purchasing Managers Index s.a (Mar)
16:15 GBP BOE’s Governor Carney speech
18:00 USD Baker Hughes US Oil Rig Count
18:30 USD Fed’s Powell Speech
20:00 USD Consumer Credit Change (Feb)

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