The US dollar traded lower against its main rivals yesterday as the market awaits the Federal Reserve’s policy statement this evening for hints on the US interest rate outlook.
The Federal Reserve is widely expected to keep interest rates unchanged at the end of its two-day policy meeting today, so the markets will look to see whether the central bank downplays the recent soft patch in the economy and whether a June rate rise is still a possibility.
Wednesday’s economic announcements will cover employment and non-manufacturing activity in April, ending with this month’s Federal Reserve interest rate decision.
The ADP employment rate is forecast to show a 180k rise in employed persons, down from 263k in March. The non-manufacturing PMI is expected to show growth from 55.2 to 55.8.
The Pound held its recent gains throughout yesterday’s session as data showed that activity in the British manufacturing sector hit its best level since 2014 in April.
Markit/CIPS reported on Tuesday that its PMI for the British manufacturing sector came in at 57.3 in April, following the preceding month’s 54.2, surpassing analysts’ expectations for a decline to 54.0. Tuesday’s data will provide additional support for Prime Minister Theresa May ahead of the June 8th General Election.
According to Markit, British manufacturers enjoyed the recent positive performance of the global economy and the cheaper Sterling, which has boosted export growth. However, earlier this year, Bank of England Deputy Governor Ben Broadbent said that a rebound in the performance of the UK manufacturing sector would solely depend on the outcome of Brexit negotiations.
Today’s main data point for the UK came from the construction sector which has shown growth in the sector for the month of April from 52.2 to 53.1. Analysts had expected to see a small slowdown in growth with a reading of 52.
Yesterday, the Eurozone manufacturing PMI showed its strongest reading for six years in April as new orders and manufacturing output both rose.
April’s final manufacturing PMI for the Eurozone was 56.7 in April 2017, compared with 56.2 in March and for today the Market awaits GDP figures from the Eurozone for Q1 of this year which are due for release at 10.00 am this morning.
Economists predict that the Bloc economy grew by a 0.5% in Q1, which would outpace Britain which only expanded by 0.3%. Last week data showed that France’s economy only grew by 0.3%, while Spain managed 0.8%. Today’s report should give a wider picture of the currency bloc.
8.55 am – German unemployment (April): Expected to hold at 5.8%. Actual 5.8%
9.30 am – UK construction PMI (April): Forecast to fall to 52 from 52.2. Actual 53.1
10.00 am – Eurozone GDP (Q1, flash): QoQ expected to be 0.5% and YoY 1.7%, from 0.4% and 1.7% respectively
1.15 pm – US ADP employment report (April): Forecast to drop to 190K from 263K
3.00 pm – US ISM non-manufacturing PMI (April): Expected to rise to 55.8 from 55.2
7.00 pm – Fed meeting: no change in policy expected; Fed expected to do 2 more rate rises this year, in June and then at some point in the final four months of the year
9.30 am – UK services PMI (April): expected to fall to 54.5 from 55
1.30 pm – US trade balance (March), initial jobless claims (w/e 29 April): trade deficit forecast to widen to $44.4 billion from $43.6 billion. Jobless claims expected to fall from 257K
1.30 pm – US non-farm payrolls (April): Expected to rise to 180K from 98K in March. Unemployment rate is forecast to rise to 4.6% from 4.5%