Market Drivers April 1, 2015

Dollar bought across the board at start of month
UK PMI Manufacturing softens a bit
Nikkei -0.90% Europe +.39%
Oil $47/bbl
Gold $1185/oz.

Europe and Asia:
AUD Building Approvals Credit -3.5% vs. -3.8%
JPY Tankan 12 vs. 14
CNY Manufacturing PMI 50.1 vs. 49.7
GBP PMI Manufcaturing 54.4 vs. 54.5

North America:
USD ADP 8:15

USD ISM Manufacturing 10:00

The dollar started the second quarter of the year much like it did the first – by gaining broadly across all of its trade partner currencies in Asian and early European trade today.

The greenback was well bid as positive momentum of dollar bulls continued to build ahead of key US economic data due later this week. The buck was especially strong against cable which once more plunged below the 1.4750 level after UK PMI Manufacturing came in just slightly softer than anticipated.

UK PMI Manufacturing printed at 54.4 versus 54.5. Although just a tad worse than forecast this was nevertheless the highest reading since July of 2014 and the underlying data showed strength as well with new orders rising to 56.2 from 55 prior and exports increasing to 52.1 from 49.5 the month before.

Overall the UK data continues to show steady impressive growth that far exceeds the neighboring EZ region, but cable continues to perform poorly, dragged in part by the short covering rally in EUR/GBP. After having fallen to multi year lows of .7000 in Q1 of this year EUR/GBP continues to stage a recovery rally and that has been capping any cable gains for weeks. In addition, the uncertainty surrounding the outcome of UK election in May is also weighing on the unit.

Yet we remain convinced that the pair represents good relative value here and is likely to find support at the 1.4600 level. Ultimately however, it will need to clear the 1.5000 figure for sentiment to turn more positive towards sterling.

In North America today the focus will be on ADP data due at 12:15 GMT. The market is looking for another strong print of 227K and it the report matches expectations it will go a long way toward assuaging fears that the US economy may be slowing down as we enter Q2. The latest string of US macroeconomic data has been less than stellar with labor data the one exception. If labor numbers now begin to turn lower as well, the positive dollar momentum could evaporate in an instant. For now the buck remains well bid with USD/JPY inching towards the 120.50 level and if the ADP proves to be positive it may even take a run at the 121.00 figure as the day proceeds.

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