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The Marketplace - 2nd April 2015
02/04/2015
Good morning
The US dollar slid for the first time this week as the first round of US Non-Farm payroll data released by payroll provider ADP disappointed, boosting the GBPUSD paring. Momentum has carried through overnight into early morning trading, key UK Construction PMI data is expected shortly with forecasts expected to show contraction in the sector compared with the previous month. Markets will be closed on Friday and Monday for the Easter long-weekend.
UK
In early trade yesterday sterling surprisingly lost ground versus a number of major currency counterparts as the main economic release of the day, Manufacturing PMI, came out at 0.1 below the market expectations of 54.4 and grew at the fasted pace in 9 months boosted by the strongest increase in new business since July 2014. Although the figures indicate expansion in the sector, the data was technically below expectations prompting sterling to slide after the release.
A separate report released by the Office for National Statistics said that UK labour productivity was little changed in 2014 compared with the previous year, as productivity fell by 0.2 percent in the final months of last year. The report also revealed that employee benefits such as wages, pension contributions and private healthcare only increased by 1 percent in the last five years.
EUR
Following the release of better than expected CPI flash data earlier in the week, there has been a lack key data from the Eurozone before the Bank Holiday, with much movement in the euro driven by headlines. Manufacturing PMI data from the Eurozone overall came in better than expecting prompting a muted reaction from the market.
Sources on Wednesday revealed that the ECB have increased the maximum ELA (Emergency Liquidity Assistance) that Greek banks can obtain by a further 700 million euros, lifting the total ceiling to 71.8 billion euros. The Greek banks are in desperate need for liquidity as individual account holders and business account holders withdrew 25 billion euros between December 2014 to the end of February, spurred by growing fears about Greece defaulting under the new ‘radical’ government.
USD
The Dollar rally broke yesterday as ADP came in lower than expectations of an increase of 231,000 jobs. Figures showed the US private sector gained only 189,000 jobs, 42,000 below the forecasts and 23,000 below Februarys figures of 212,000. These are the lowest ADP figures since July 2014 (790,000 jobs), meaning that there has been a decrease in new jobs in the private sector. We are still expecting the further jobs data on Good Friday from the US, although UK markets will be closed we are expecting the data to prompt movement in dollar based crosses.
Alongside the poor jobs data ISM Manufacturing PMI figures have come in at 51.5 which is 1 point lower than the forecasted 52.5 and 1.4 points lower than previous 52.9 results. On the other hand the reading remained above the 50 point line, indicating continued growth.
Key Data
US Trade Balance: The US trade deficit narrowed in January to USD 41.8 billion amid weakening in exports and imports. The 8.3 percent fall was broadly in line with market forecast. Imports contracted due to lower oil prices and labor strikes disrupting shipping of goods. Exports fell by USD 5.6 million to USD 189.4 billion while imports dropped USD 9.4 billion to USD 231.1 billion. However, domestic production increased due to low oil prices and petroleum imports fell 23 percent to USD 17.7 billion. The US trade deficit is expected to contract further to USD 41.5 billion.
US Unemployment Claims: The number of Americans filing initial claims for unemployment benefits declined more than expected last week, reaching 282K after a 291,000 addition in the prior week. The 9,000 drop continues to suggest an ongoing improvement in the US job market despite the recent volatility due to the harsh weather, softer global demand and the strong dollar. The four-week moving average fell 7,750 to 297,000 last week. The number of jobless claims is expected to reach 285,000 this week.
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