- Eurozone data down – GBP-EUR treading water
- US Dollar boosted by strong employment report expectations
A much worse than expected UK Service Sector Purchasing Managers’ Index (PMI) knocked the Pound yesterday, coming, as it did, on the back of a poor construction sector index the day before. The index for March was 51.7 against a market expectation of circa 54 and down from the February figure as well. So the Sterling – US Dollar exchange rate fell below $1.40. There is an absence of UK data today, so traders will have to focus on the US employment data later if they want to see any movement in this pair.
Eurozone data also down – GBP-EUR treading water
The Sterling - Euro exchange rate stayed pretty static, though, because the Service Sector Index for the Eurozone was also down; although not quite as starkly. However, Eurozone retail sales failed to live up to the very strong growth expected by the forecasters. A 0.1% rise being small beer compared to the 0.6% the markets were expecting. As with the UK, there is nothing substantive in the EU data diary today, so all eyes will turn west and seek out the US data.
All eyes on US employment data
Speaking of which, the US trade deficit widened in February, although a widening of $900 million seems piffling compared to the $57.6 billion overall figure. But that is nothing compared to the US employment data from March which will excite and delight traders everywhere. We are expecting the rate of job creation to have slipped but the US unemployment rate to have dropped to 4.0%, which will be the lowest seen since the 2007 financial crisis and about as near to full employment as any country is likely to achieve. That will be seen as a prelude to higher wage growth and that will spur calls to the Federal Reserve to hasten the pace of its interest rate hikes. US Dollar strength ought to ensue and that is partly why the USD strengthened against everything yesterday.
Canadian employment data also expected
We will also get Canadian employment data and that too is expected to be rather positive. It is hard for a country with such sparsity of population to achieve the same sorts of levels of full employment as the USA, but anything below 6% is pretty near for Canada. We are expecting 5.8% (same as last month) and, were it not for the nervousness over the North Atlantic Free Trade Agreement (NAFTA), the Canadian Dollar would also strengthen. It will if all the rhetoric over ‘negotiations progressing’ proves to be real.
Party like it’s 2021
And then it’s the weekend. If you are thinking of booking your holidays, think ahead to 2021 and start saving. If by then you have set aside the odd £7 million (£14 million per couple), you could be heading off for a 10-night stay in an orbiting hotel called Aurora. Just so you know, I haven’t written out my deposit cheque for £60k just yet. I mean, they are only sending two crew and four guests up at a time. They’ll be no atmosphere, will there?
At the end of the ward in a city hospital is a chap with an enormous bandage on his head. A new nurse arrives at his bedside. “Oooh you have been in the wars haven’t you,” she said. “What happened to you?”
“Well, I went down to that new theme park at the weekend and decided to take a ride on that roller coaster they’ve been advertising. Anyway, as we came up to the top of the highest loop, I noticed a little sign by the side of the track. I tried to read it but it was very small and I couldn’t make it out. I was so curious that I decided to go around again but we went by so quickly that I couldn’t see what the sign said. By now, I was determined to read that sign so I went around a third time. As we reached the top, I leaned out to get a better view.”
“I’m intrigued. What did the little sign says then?” asked the Nurse.
“It said, ‘Stay inside the car at all times.”