Morning Report: 6 April 2018

April 6, 2018

GBP Sterling weakened yesterday as survey data suggested that growth had slowed to a crawl in the first quarter. Markit’s Services Purchasing Managers’ Index fell to its lowest level since July 2016, immediately after the Brexit referendum. The result echoed similarly grim ones from equivalent indices for Construction and Manufacturing earlier in the week but should be taken with a large grain of salt due to severe weather disruptions from a series of snowstorms during the survey period. New work continued to rise at a modest rate, while cost pressures and staffing difficulties were also a theme.

USD The dollar had a relatively strong performance yesterday, only losing to the Swiss Franc in the G10 currencies. USD seems to be becoming less sensitive to threats of an escalation in trade tensions, with the dollar not reacting much despite reports of US President Donald Trump requesting additional tariffs to the value of $100 billion on Chinese products. USD even traded up slightly in the overnight market. Today at 13:30 BST US labour market is published, with Unemployment, Non-Farm Employment Change and the star of the session, Average Earnings Growth. The latter is in the limelight as wage pressures are an important inflation indicator for the Federal Reserve. Fed chair Jerome Powell speaks about the economic outlook at 18:30.

EUR EURUSD continued to trend downwards yesterday, reaching a fresh low for the week before the euro found some support. Eurozone Services Purchasing Managers Indices made for slightly more optimistic reading than their UK equivalent, as the region-wide index came in only slightly below expectations. Eurozone Retail Sales, however, fell well short of expectations and expanded only 0.1% in February after contracting in January. This morning German Industrial Production data also came in well under expectations, contracting 1.6% in February.

CAD Loonie strengthened for the third day in a row against the dollar yesterday while it booked solid gains elsewhere as well, though it is under some pressure this morning. NAFTA representatives from Canada, the US and Mexico had a dinner last night in Washington, so today some news may leak out about what was discussed there. Additionally, today’s data calendar is richly filled with Employment Change and Unemployment at 13:30 BST, followed by Ivey Purchasing Manager Index figures at 15:00.

UK news

  • Financial Times: Trump threatens $100bn in additional Chinese tariffs. US president Donald Trump has ordered his administration to put together a plan for an additional $100bn in tariffs on imports from China, escalating a trade fight with Beijing that has unnerved financial markets around the world.
  • Bloomberg: China Vows to Fight Trump Tariffs ‘to the End’ as Tension Rises. China said it would counter U.S. protectionism “to the end, and at any cost,” as a war of words over President Donald Trump’s proposed tariffs on Chinese imports escalated.
  • Reuters: ‘You’ll be sorry,’ Russia tells Britain at U.N. nerve agent attack meeting. Russia told Britain at the United Nations Security Council on Thursday that “you’re playing with fire and you’ll be sorry” over its accusations that Moscow was to blame for poisoning a former Russian spy and his daughter.

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