Pound above 1.3850 as UK confidence grows
Ahead of the Bank Holiday weekend the Pound was fairly stagnant, trading within narrow ranges, supported near 1.3800 to the US dollar. Futures market data showed an increase in bets on Sterling strengthening, for the first time in a month.
Boris Johnson confirmed that the next phase of restriction easing would go ahead as planned on April 12, and significantly for this newsletter this features“non-essential retail”. Confidence in the UK economic recovery supported the Pound and Rishi Sunak announced a new government-backed loan scheme to help companies recover. The FTSE 100 and equities markets globally posted solid gains adding support for the Pound. Sterling climbed to just above 1.3900 to the Dollar and the Euro continued to test the key 1.1765 support area, although volumes remain low. The Pound opens just above 1.3900 this morning and the Euro just below 1.1765 as UK markets re-opened.
US non-farm payrolls increased 916,000 for March, well above consensus expectations of a 650,000 increase, and the February increase was revised higher to 468,000 from the original figure of 379,000. There were solid gains across most sectors and a rebound in government jobs for the month.
Unemployment declined to a 12-month low of 6.0% from 6.2% previously and in line with market expectations. Most European markets were closed and there was a partial US holiday which curbed market reaction and the dollar gained only slight further support.
CFTC data recorded a decline in long, non-commercial Euro positions to a 12-month low, limiting the scope for further selling.
The US PMI services-sector index was revised to 60.4 for March from the flash release of 60.0 with the fastest increase in incoming business for over 5 years.
The ISM services-sector index strengthened sharply to a record high of 63.7 for March from 55.3 previously and well above consensus forecasts of 58.3. There were also very strong increases in the rate of production and orders growth with both figures posting record monthly highs. Employment increased at a faster pace for the month while the rate of price increases also accelerated. The data maintained strong underlying confidence in the US outlook.
Euro-zone confidence remains low due to the current outlook, especially with France entering a 4-week lockdown. There is some good news on the horizon though as expectations of a faster vaccination programme across Europe provide a little bit of confidence.
Despite the concerns the Euro gained ground against the Dollar pushing above 1.1800 over the weekend. Heading into this week the Euro remains above the 1.1800 level against the US currency but continues to lose momentum against the Pound.