Morning Report: 1 April 2016
1st April 2016 By: Ranko Berich
GBP Sterling has been on a relentless downwards trend against the euro, which continued yesterday, with GBPUSD also selling off before recovering slightly overnight. The UK’s Gross Domestic Product Growth was confirmed to have grown 0.6% in Q4 2015, a solid rate compared to that seen across the eurozone and more than the previous estimate. The Index of Services also rose by more than expected in the three months ended February, although business investment plummeted 2%. The UK’s Current Account deficit ballooned to more than £32B, although this was at least largely due to investment income from the rest of the world being vastly outstripped by remittances to overseas investors and is not a sign of an impending balance of payments crisis. This morning’s Markit Purchasing Managers Index release showed that reported output in the Survey sector continues to grow at a sluggish pace.
EUR The euro had another good day yesterday, tentatively rising to new highs for the month against USD while continuing its relentless advance against sterling. The eurozone as a whole did not manage to rise out of deflation in March, according to official data, but Italian, and French Consumer Price Index data showed that prices were improving in those economies. This morning has seen the release of survey data from the Manufacturing sector research company Markit. The company’s Purchasing Managers Indices showed reported output growing across Italy, France, Germany and Spain, as well as the eurozone as a whole at a slow rate, but growing nonetheless.
USD The US dollar is under sell pressure this morning, with sterling among the only G10 currencies that did not manage to eke out some gains vs the greenback overnight. The broad downwards trend seen on USD this week will face a serious test today with the release of official Non-Farm Payrolls at 13:30 BST. Non-Farms remain the most closely watched data point in the US, and opinions seem to be finely balanced at the Federal Reserve regarding the appropriateness of rate hikes in the immediate future. Today’s release seems set to have a maximum impact as a result. Average Hourly Earnings will be of primary importance in addition to headline job creation, after a recent slowdown in the rate of earnings growth has given the Fed cause to question if inflationary pressures would justify further rate hikes. Following the Non-Farms release, research companies Markit and ISM will release the results of their latest Manufacturing surveys at 14:45 and 15:00 respectively.
CAD CAD weakened yesterday, despite the fact that Canada’s Gross Domestic Product rose a whopping 0.6% in January. Manufacturing, retail, and the natural resource sector were the largest contributors, but service producing industries also posted their fourth consecutive monthly gain. Today at 14:30 BST the RBC Manufacturing Purchasing Managers Index will be released.
- Financial Times. Services close to 80% of UK economy. Britain’s service industry recorded its 12th consecutive quarter of growth on Thursday and now accounts for almost 80 per cent of the economy. The Office for National Statistics underlined how services are at the heart of economic growth, registering a 2.8 per cent rise in January compared with the same month last year.
- Reuters. British current account deficit balloons, EU campaigners clash. Britain’s current account deficit has surged to a record high, underscoring a weak spot in an economy that is coming under sharper focus before a vote on whether to remain in the European Union.