UK Services Data, Trade Headlines in Focus

UK Services PMI poses a risk to the pound this morning, while investors will continue to keep an eye on the latest trade headlines.

Previous Day's Market Highlights

While there was some dollar volatility around the latest tariff headlines as China outlined its response, the rates remained in overall familiar territory. The greater effect was felt by equities, which had another volatile day. Euro-dollar recovered 1.23 after earlier falling towards 1.2250. Sterling-dollar continued to fluctuate in the 1.40-1.41 band, where it’s held since 28 March. Sterling-euro held above 1.14.
 
Eurozone CPI figures were mixed as headline inflation accelerated as forecast to 1.4% but core inflation held stubbornly at 1.0%. The euro gained ahead of the release. The ECB targets a rate of 2%. A drop in the UK’s Construction PMI had contributed to a softer sterling in the morning session.
 
US data were mixed as the ADP Employment Change figure came in higher than forecast while the ISM Non-Manufacturing Purchasing Managers’ Index slowed more than forecast. Fed member Bullard struck a dovish tone, saying that policy is close to neutral and that raising interest rates further isn’t necessary.
 
Overnight, Australia’s trade balance showed a higher-than-forecast surplus, which slightly strengthened the Aussie.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1460 1.1538 1.1164 3.24%
GBP/USD 1.4053 1.4245 1.3781 3.26%
EUR/USD 1.2263 1.2477 1.2239 1.91%
GBP/AUD 1.8263 1.8509 1.7599 4.92%
GBP/NZD 1.9278 1.9644 1.8925 3.66%
GBP/CAD 1.7946 1.8417 1.7726 3.75%

Today's Market Highlights

Services PMI rounds out the UK’s three PMI releases this morning (09:30 BST) and is also forecast to soften, which could weigh on the pound, particularly given the drop in yesterday’s construction index.
 
In the afternoon, the US releases trade balance and weekly Initial Jobless Claims data. A wider deficit and slight uptick in the number of claims could keep the pressure on the dollar, but the data will likely struggle to move rates out of recent ranges. Investors will continue to keep an eye on the latest trade developments. Fed member Bostic speaks tonight on financial literacy.
 
Tomorrow, the US will remain in focus with the release of the March jobs report. An expected strong Nonfarm Payroll reading and uptick in wage growth may strengthen the dollar.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Markit Services PMI (Mar) 54.0 54.5
10:00 EUR Producer Price Index YoY (Feb) 1.5% 1.5%
10:00 EUR Retail Sales YoY (Feb) 2.1% 2.3%
13:30 USD Trade Balance (Feb) $-56.8B $-56.6B
13:30 USD Initial Jobless Claims (Mar 23) 225K 215K
13:30 CAD Trade Balance (Feb) $-2.00B $-1.91B
18:00 USD Fed's Bostic Speaks

Caxton