The cable tipped back under 1.3900 after earlier pegging an 18-day high at 1.3920. The pound yesterday printed a 14-month high versus the euro, which although occurring in holiday-thinned trading reflects the contrasting fortunes of the reopening UK economy with the re-restricted economies across the Channel. The rate of new Covid cases now 4% of what it was at the peak seen in early January, despite a more than doubling in testing over that time, while the death rate is less than 3% of what it was at the highs. A 10-year high in the final March manufacturing PMI (data released last Thursday) was an endorsement of sorts for Brexit, being achieved despite the increased trade friction that has been caused between the UK and EU because of Brexit. The two sides last week reached a post-Brexit Memorandum of Understanding (MOU) on financial regulation, which had been widely anticipated. The MOU will help to lay out a framework for cooperation on regulations and a forum for discussing rules, procedures, and information sharing. The UK data calendar this week is quiet. The main highlight will be the final releases of the March services and construction PMI surveys (due Wednesday and Thursday, respectively). Market participants will be factoring upside risk following the unexpected upward revision of the final manufacturing PMI report, which came in at a 10-year-plus high of 58.9 in the headline reading. The median forecast for the final services PMI is 56.8, and 56.6 for the composite reading.
The dollar has found its feet after taking a tumble in thin markets yesterday. The bullish case for the dollar remains strong, given the outsized fiscal stimulus coursing through the U.S. economy alongside the relatively advanced states of Covid vaccination progress in the U.S. and the likelihood for further widening in the U.S. Treasury yield differential versus peers. The March jobs report was a blowout, while the ISM services index surged to a record peak. Wall Street also scaled to new record highs yesterday. The only blot on the bullish dollar landscape is the uber accommodative stance of the Fed, which has been downplaying the scope for runaway inflation risks, although the relatively high Treasury yields, among low- and sub-zero yielding peers, will offset this. The DXY dollar index has lifted to the upper 92.0s after yesterday posting a 12-day low at 92.52. EUR-USD has concurrently tested the waters below 1.1800 after making a 12-day peak at 1.1820. USD-JPY has lifted back above 110.00. AUD-USD has dropped back from one-week highs, while Cable has tipped back under 1.3900 after earlier pegging an 18-day high at 1.3920. The pound yesterday printed a 14-month high versus the euro, which although occurring in holiday-thinned trading reflects the contrasting fortunes of the reopening UK economy with the re-restricted economies across the Channel. The rate of new Covid cases now 4% of what it was at the peak seen in early January, despite a more than doubling in testing over that time, while the death rate is less than 3% of what it was at the highs. In data today, Chinese services PMI came on the strong side, at three-month highs, as did China's composite PMI reading. Beijing has made clear that it will be trimming lending, which has caused some investor indigestion, though it reflects policymakers' confidence in the outlook. The RBA left policy settings unchanged following its April policy review while pledging ongoing accommodation. The central bank still cautioned about the side-effect of its policy fuelling a potential house price bubble.
XE Market Analysis Europe – 06th April 2021
GBP>EUR – 1.1736
GBP>USD – 1.3856
EUR>USD – 1.1802
GBP>CAD – 1.7380
GBP>AUD – 1.8167
GBP>SEK – 12.070
GBP>AED – 5.0881
GBP>HKD – 10.755
GBP>ZAR – 20.194
GBP>CHF – 1.3005
· EUR Unemployment(Jan)
· EUR Unemployment Rate(Feb)
· AUD Commonwealth Bank Services PMI(Mar)
· AUD AiG Performance of Construction Index(Mar)
- EUR/USD: Recent recovery seems short-lived until Europe ramps up its vaccination effort
- GBP/USD recaptures 1.39 amid the UK easing optimism
- Forex Today: Dollar retreats with yields, markets wary of Chinese cooling, US stimulus news eyed
- AUD/USD slides to fresh session lows, still comfortable above 0.7600 mark
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