Cable held near the midway point of a sideways range that's been seen over the last four trading days, around the 1.3760-70 mark. We expect the pound to remain on a firming track against the euro and yen, but to struggle more in the cases against the dollar and cyclical currencies, such as the dollar bloc units. Incoming BoE policymaker remarks have been reflecting on the overall brightening outlook for the UK economy. Monetary Policy Committee member Saunders last Friday that unemployment is not likely to show the extent of rising that was forecast by the central bank in February, and BoE Chief Economist Haldane said that he expects a "rip-roaring" recovery, with consumers chomping at the bit to spend lockdown savings. These comments followed the release of preliminary March PMI survey data that smashed expectations, finding businesses reporting an increase in consumer demand in anticipation of societal reopening was already underway. The UK vaccination status, alongside the rate of Covid infection and mortalities, remains highly encouraging. There are concerns about the emergence of new variants that will render existing vaccinations obsolete, or at least less effective, which is the reason behind the UK government's draconian decision to make it illegal for its citizens to take foreign holidays in the months ahead. The evidence so far suggests that existing vaccinations will still have significant efficacy against new variants, including the Brazilian version, which is the most worrisome of the known variants.
The Australian dollar led a correction in the dollar bloc currencies today, while most dollar pairings and cross rates saw relatively narrow ranges. Markets have been thinning out somewhat following the passing of month- and quarter-end yesterday, and into public holidays that will be seen in many Asian countries tomorrow, and in Australia, New Zealand, and Europe. EUR-USD settled in the lower 1.1700s, just above yesterday's five-month low at 1.1703, and USD-JPY held a narrow range below yesterday's one-year peak at 110.96. Cable held near the midway point of a sideways range that's been seen over the last four trading days, around the 1.3760-70 mark. AUD-USD fell by over 0.6% in posting its lowest level since December 20th, at 0.7533. The Australian dollar also fell to three-day and one-week lows against the yen and euro, and respective nine-day and four-month lows in the case against New Zealand and Canadian dollars. USD-CAD, after posting a nine-day low yesterday at 1.2537, recouped to a high at 1.2602, despite a firming in oil prices. There didn't appear to be any particular catalyst behind the Aussie's underperformance. A batch of data out of Australia was mixed. Stock markets in Asia rose after the S&P 500 yesterday pegged a fresh record high. Oil prices rallied by over 2% today, extending a rebound from yesterday's six-day lows amid expectations for today's OPEC+ meeting to produce an agreement to maintain restricted output quotas for another month, while base metal prices were mixed. U.S. President Biden yesterday detailed the Democrat's infrastructure plan, which tallies $2.25 tln, which will add to the $1.9 bln pandemic relief package. March manufacturing PMI survey data out of Asia, meanwhile, mostly showed an acceleration in activity, albeit alongside a rise in cost pressures. Data out of Japan, South Korea, Taiwan, Vietnam, and Indonesia all highlighted rising activity. China's Caixin/Markit manufacturing PMI, which reports on smaller businesses, came in below expectations, at 50.6 in the headline reading, though the official manufacturing PMI survey showed stronger activity. Similar strong readings are expected from European and North American data today. On the pandemic front, France yesterday announced a month-long extension in national lockdown measures, and the state of Ontario in Canada also announced new restrictions.
GBP>EUR – 1.1743
GBP>USD – 1.3784
EUR>USD – 1.1737
GBP>CAD – 1.7343
GBP>AUD – 1.8224
GBP>SEK – 12.046
GBP>AED – 5.0613
GBP>HKD – 10.714
GBP>ZAR – 20.330
GBP>CHF – 1.3051
· USD ISM Manufacturing PMI(Mar)
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XE Market Analysis Europe – 01st April 2021