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Currency Market Update - 5th April 2023

Currency Market UpdateOn Monday we saw USA- PMI Data release 1.2% below the forecasted 47.5 at 46.3%, this caused the Dollar to lose ground against both Pound (1.1442) & Euro (1.0904).

Following recent banking issues across America & Europe the outlook for the UK economy has been positive in the last couple of weeks and Monday saw investors put a 75% chance on a further 25 bps hike in May and more than 50% probability of another 25 bps hike in August. On 23 March BoE decided on a further 25 bps, following signs of weaker inflationary pressures, taking the base rate to 4.25%.

Today we have S&P Global Services PMI Final (MARCH) Germany & The Euro Area, both of which were forecasted to improve by 3% than previous, although for Germany the data fell shy by 0.2% but still 3.2% better than previous.

UK services PMI is forecast to drop by 0.7% drop (53.5/52.8).

USA- 30 Year Mortgage Rates & Mortgage Applications are due to release with no forecast, but both have been falling for many months now and with Federal Reserve having recently hiked rates by a further 25 bps, not much improvement is expected.

US- ADP Employment Change is suggesting a 42K drop in the number of people employed- we know that employment in America has been falling and currently sits below Feb 2020 Pre-Pandemic levels – in Feb this year the labour force participation rate sat at 62.5% and the employment-population ratio held at 60.2%.

Balance of Trade for Canada (FEB) is forecasting a C$0.12B drop in its trade balance- Canada has seen an increase in both import and export activity, rising by 142.2B and 124.9B, respectively, but overall registering a trade surplus, with exports exceeding imports -mainly through higher exports of energy products (America being its main export partner).
USA Balance of Trade- Forecasted to widen by $1.7B to -$69B. In January, a 3 month high of $-68.9B was registered. Exports were up 3.4% to $257.5B. The steepest deficit was against China ($21.9B), followed by the EU, Mexico, Vietnam, Japan and Canada, while surpluses were seen with South & Central America, Th Euk, Australia & Hong Kong.

US-S&P Global Composite PMI Final (MAR) and S&P Global Services PMI Final (MAR) both forecasting an increase by 3.2%. Although ISM Non-Manufacturing PMI (MAR) is expected to drop by 0.6% to 54.5- indicating nervousness amongst purchasing & supply chain Executives across the country.

For the rest of the week, Construction PMI data due out for Germany & UK and Canadian Employment data on Thursday and then US-Non Farm Payrolls and Unemployment data is due out on Friday.



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