Morning Report: 5 April 2016

5th April 2016 By: Ranko Berich

GBP Yesterday was a reasonably quiet day for sterling, which rallied slightly against USD and EUR. Brexit risk seems to remain front of mind of markets when dealing with sterling, and implied volatility on options’ markets going into the EU referendum is high and rising. Markit’s Construction Purchasing Managers Index showed that output was continuing to expand across the sector, according to the surveyed businesses. Today, the equivalent index for the services sector, which is the economy’s largest by far, will be released at 09:30 BST.

EUR Tension has crept into global equities and crude oil markets this morning, and although JPY has benefitted off some mild “safe haven” appreciation, the euro has not yet seen the kind of strength it enjoyed during the last two major equity routs. Sentix Investor Confidence fell slightly according to the April release of the regular survey, although yesterday’s data also showed eurozone Unemployment steady at 10.3%. Producer prices, however, continued to plummet, falling 0.7% in February. Today’s calendar has a number of euro releases, and German Factory Orders have already been released at a disappointing -1.2%. French and German Services Purchasing Managers’ Indices will be released at 08:50 and 08:55 BST respectively, ahead of the eurozone wide figure at 09:00. The surveys have generally been reporting expansion across the eurozone’s services sector for several months, so no major disappointments are expected. At 10:00 BST, Retail Sales data will be released.

USD USD is up against most of the G10 since midnight BST, with JPY being the notable exception as equity markets sell off globally. Yesterday’s data releases were fairly grim, with Factory Orders falling 1.7% in February and the Labour Market Conditions index remaining in negatives, as the 19 indicators that comprise the index have failed to show much improvement in recent months. This is despite some good news from the labour market, such as last week’s generally positive Non-Farm Payrolls report. The Job Openings and Labour Turnover summary will be released today at 15:00 BST, providing a look at the state of demand for workers. Research companies Markit and ISM will release survey data from the Services sector, with both of their Purchasing Managers Indices due for release at 14:45 and 15:00 respectively.

CAD Crude oil prices are once again trending downwards, and the loonie is weakening accordingly. Canada’s Trade Balance will be released today at 13:30 BST, and a surplus is expected after several months of gradually shrinking deficits. Considering the improvement in recent business confidence surveys, a trade surplus could further reinforce the idea that the Canadian economy is recovering healthily. The Bank of Canada’s Carolyn Wilkins will speak today at 20:00 GMT.

UK News

  • BBC. EU referendum: Migrant job data to be published. Specific information about the number of EU migrants paying tax and claiming benefits in the UK will be published in the run-up to June’s EU referendum.
  • Reuters. UK housebuilding stalls in March, construction growth moderates – PMI. Growth in construction of new homes in Britain ebbed to its lowest level in three years in March, according to a survey on Monday that showed the overall expansion in the building trade held at its weakest in nearly a year.
  • Reuters. Bank of England to leave Bank Rate at 0.5 pct until early 2017.