Market Drivers April 1, 2016

Dollar weakness persists
UK PMI misses EURGBP at 15 month highs
Nikkei -3.55% Dax -1.50%
Oil $38/bbl
Gold $1234/oz.

Europe and Asia:
CNY PMI Manufacturing 50.2 vs. 49.4
EUR PMI Manufacturing 51.6 vs. 51.4
GBP PMI Manufacturing 51 vs. 51.2

North America:
USD ISM Manufacturing 10:00

The dollar remained lower against most the major trading partners ahead of the key US Non Farm Payrolls release due later today. With dollar bulls badly beaten this week by the persistently dovish Fed there is little reason to think that today release could turn the tide for the buck unless wage data improves markedly.

Meanwhile manufacturing data from across the globe was slightly better suggesting that the slowdown at the start of the year is beginning to be reversed. Chinese PMI turned positive for the first time since August printing at 50.2 versus 49.4 eyed. Eurozone data was better as well coming in at 51.6 versus 51.4.

The only manufacturing release to miss its mark was from UK where the PMI reading printed at 51 versus 51.2 forecast. This was still better than 50.8 the month prior but remains dangerously close to the 50 boom/bust mark. Furthermore employment declined for the third month in a row and and so did new export orders.

The turmoil in UK politics, with fear of Brexit a very real possibility, continues to exert a subtle yet clear influence on investor behavior. Yesterday’s shockingly large CA deficit – the largest on record- is another sign that UK trade and capital flows could become more problematic if the Leave vote gains more support. Meanwhile EUR/GBP hits 15 month highs in overnight trade as it continues to inch towards the 8000 cent mark that it hasn’t seen since December of 2014.

As to the NFPs – the market anticipates a reading of 205K versus 242K the month prior but the far important data point for traders will be the average hourly earnings which are expected to rebound to 0.2% from -0.1% the month prior. Last month surprising decline may have contributed to Fed’s dovishness as they continue to look for evidence of wage price inflation before normalizing monetary policy further.

With sentiment now firmly set against the buck, only a sharp surprise to the upside could send the greenback higher. On the other hand another miss on wages could easily push EUR/USD through the 1.1500 level while sending USD/JPY towards 111.00 figure.

Leave a Comment

Hide me
Receive Thought Provoking Forex Commentary Directly to Your Inbox
Show me