Morning Report: 6 April 2016

6th April 2016 By: Ranko Berich

GBP Sterling fell sharply yesterday after the release of survey data showing a still sluggish services sector in the UK, which slightly picked up but on a quarterly basis the growth was the weakest since 2013. Moreover, March saw the weakest job creation in the last two and a half years in this sector. Today’s morning release of the British Retail Consortium shop price index registered the 36th consecutive month of falls in prices, reflecting that deflation deepened in non-energy related products. No other releases are expected today.

EUR The euro is falling against most of the G10 currencies this morning after yesterday’s mild risk off mood eases. The euro weakened slightly yesterday after the services sector survey data showed that the Eurozone failed to gain with respect to February’s 13 month lows. Countries such as Spain and Germany improved significantly signalling to a 0.6% and 0.4% increase in economic growth in Q1 2016 respectively.

USD The US services sector showed a significant improvement in March after yesterday’s release of the ISM’s Non-manufacturing purchase manager index. The survey data reflected an improvement in business activity and new orders, which also could increase the demand of workers in coming weeks. No macro data is expected today, but the Federal Open Market Committee releases its latest meeting minutes. No changes in interest rates are expected at the moment as traders are pricing in a 0% probabilities of a hike. Markets are expecting a dovish statement after the Fed’s President Janet Yellen last speech. However, up to four members pointed towards monetary tightening before Yellen’s last speech, which could weigh on today’s minutes in the form of unexpected subtle, but unexpected, optimism. The minutes are released at 19.00 BST.

CAD Crude oil prices are weakening since April’s beginning and the loonie is falling accordingly. The OPEC and Non-OPEC countries meeting taking place on April 17th is expected to bring high volatility to the crude oil markets as Iran has explicitly stated they will not freeze production which prompted Saudi Arabia to declare they will not freeze production if Iran does not. For the next two weeks statements and rumours coming from the countries involved in this meeting will affect crude oil prices significantly. Today, however, commodity traders will keep an eye in the crude oil inventories release in the US at 15.30 BST, as another increase in crude stocks is expected.

UK News

  • BBC. UK service sector growth ‘remains subdued’. Growth in the UK’s services sector picked up last month but remained “subdued”, according to a survey. The latest Markit/CIPS services Purchasing Managers’ Index (PMI) rose to 53.7 last month, up from February’s near three-year low of 52.7.
  • Reuters. British shop prices decline by smallest amount since August – BRC. British shop prices fell by the smallest amount in seven months in March, but continued their slide as retailers cut prices to attract customers.