31 Mar 2016

Back Once Again For The Non-Farms Friday

United States Dollar: No real movement from the greenback as investors are holding on for the non-farms release at 1:30 pm this afternoon (forecast of 206k jobs added), coupled with earnings data which is expected to show an up-tick after last month's negative posting (0.2% forecast, previous of -0.1%). Unemployment is scheduled to stay at a low reading of 4.9%, and the ISM Manufacturing PMI is forecast to show slight expansion at 50.8. We expect to see volatility throughout the afternoon, and if the releases come in above forecast, we could see the dollar reverse some of the losses following Yellen’s comments earlier this week. Pound was little changed against the dollar (highs of 1.44, falling slightly to 1.4362), with the mornings gains following the revised GDP figure (0.6% vs forecast 0.5%), negated by the widening Current Account posting. The shortfall of £32.7 billion is the largest since records began, and illustrates the gap between the money being paid out by the UK and money coming in. As mentioned yesterday, the Bank of England has highlighted that the UK relies on foreign investors to cover the shortfall, and a Brexit vote could make it harder to attract them in future. Whilst the GDP figure showed economic growth was stronger than first expected, it did mask the fact that it relied heavily on consumer spending, and this may not be sustainable as household incomes have fallen. Today sees the monthly Manufacturing PMI, forecast to post at 51.4, with a previous of 50.8 (above 50.0 indicates expansion), which could help relieve some of the recent downward pressure.

We expect a range today in the GBP/USD rate of 1.4250 to 1.4410

Euro: The single-currency peaked to just under 1.14 against the dollar today, following the rise in core inflation (0.8% to 1.0%). It also held its recent gains against the pound (1.2601). The Euro has surprisingly strengthened this year in the face of further stimulus from the ECB (5% increase against the dollar) and further short-term gains are predicted. Todays key release is the unemployment rate, due out at 10am, and is not forecast to change from 10.3%.

We expect a range today in the GBP/EUR rate of 1.2550 to 1.2650

Aussie and Kiwi Dollars: Nothing of note from either of the Antipodean currencies. Chinese manufacturing activity expanded for the first time in 7 months, with a 9-month high of 50.2. This better-than-expected data suggests recent stimulus measures have helped the world’s second biggest economy start to work its way out of its recent slump, which is positive for Australia as a trading partner. China is in the transition from an export-led economy to a consumption-based model, which has caused the slowdown in 2015. The AUD and NZD are both trending upwards against sterling, with rates this morning at 1.8680 and 2.0743 respectively.

We expect a range today in the GBP/AUD rate of 1.8600 to 1.8800

We expect a range today in the GBP/NZD rate of 2.0650 to 2.0850

Data Releases

AUD: No data

EUR: Unemployment Rate

GBP: Manufacturing PMI

NZD: No Data

USD: Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate, ISM Manufacturing PMI

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