Morning Report: 7 April 2015

7th April 2015 By: Ranko Berich

GBP It has been a quiet few days of trading for sterling due to the two Bank Holidays on Friday and Monday because of Easter. We expect this week to be quiet and the major bit of economic data from the UK will be the interest rate announcement from the Bank of England on Thursday. The Bank of England is an apolitical body so it would be an interesting move if they changed the base rate in their last meeting before the UK General Election. The Purchasing Managers Index data from Markit and CIPS is released from the UK at 9.30am this morning.

EUR Before the Easter Bank Holiday, Greece presented its creditors with a list of reform proposals. The plans are currently under consideration, and some industry experts are taking the fact that the measures weren’t dismissed out of hand to be a positive sign. Further Euro gains followed the announcement that Greece will be meeting its upcoming debt obligations. Although the Hellenic nation is fast running out of funds, alternate Finance Minister Dimitris Mardas asserted that Greece won’t default on its next payment to the International Monetary Fund (IMF). He stated; ‘The country will pay the IMF on April 9. There’s money there for payment of salaries, pensions and whatever else is needed for all of next week. That doesn’t mean that there isn’t for the week after. This is a political decision that will be taken, and we will follow whichever political decision.’ IMF Managing Director Christine Lagarde and Greek Finance Minister Yanis Varoufakis met in Washington on Sunday to discuss the situation.

USD The dollar remained on the back foot following Friday’s disappointing payrolls data. Non-farm payrolls increased by 126,000 last month, the smallest gain since December 2013. That ended 12 straight months of job gains above 200,000, the longest streak since 1994. The data has led to speculation that the Federal Reserve may delay their first increase in U.S. interest rates in nearly a decade, which had been expected later this year. The dollar tumbled as much as 1 percent against the euro after the significantly weaker-than-expected report, while US Treasuries rose, with benchmark 10-year yields hitting nearly two-month lows. Although yesterday, solid readings from the US services ISM & PMI indices for March did help the currency regain some ground. There will be some interest in the latest Fed meeting minutes, which are released on Wednesday at 7pm BST. Markets will be looking for further insights into the more cautious tone to the Fed that emerged from the March FOMC meeting and in particular to forward guidance on interest rate changes.

CAD The Canadian dollar traded in a tight range yesterday, after rising following the weak US Non-Farm Payrolls on Friday. The loonie kept its gains against the US dollar yesterday in a very range-bound session, as low liquidity kept other major currency pairs subdued in terms of volatility. Yesterday’s slightly below expectation result of the Ivey Purchasing Managers Index failed to push CAD back lower against the dollar, as investors and market participants will likely stay focused on US macro data and news from the Fed on Wednesday.

UK news

  • Guardian. CBI says soaring pound has battered UK export drive: Employer group says UK too reliant on services for growth and rise in sterling, especially against euro, has hit export orders.
  • FT. More young renters give up on ever buying a home: A growing number of young people have given up on the idea of buying their own home, reinforcing signs that property ownership could cease to be the norm for the next generation.
  • FT. Labour and Tories trade blows over plans for ‘secret’ tax rises: The Conservative and Labour parties on Monday ushered in the new tax year by trading blows over each other’s “secret plans” to burden working families with tax rises after the May 7 general election.
  • FT. HMRC closes buyout firms’ use of partnership tax loophole: HM Revenue & Customs has moved to close a loophole that allowed buyout firm executives to avoid paying income tax on investor fees by using limited partnerships, in legislation whose details could make greater change possible after May’s general election.
  • Daily Mail. Bank of England officials set to clash over interest rates in UK as they battle to keep economic recovery on track: Bank of England officials will this week clash over interest rates in the UK as they battle to keep the economic recovery on track.