President of the European Central Bank (ECB) Mario Draghi delivered a speech this morning where he told his audience that before altering the ECB’s stance on monetary policy they need sufficient confidence that inflation will converge to their aim and remain at those levels, even in less supportive conditions. This comes in defence of some suggestions that the ECB were about to start tapering its asset purchase programme / being raising interest rates – with this message we could well see further Euro weakness.
Last night we saw the most recent Fed minutes released and they were slightly more hawkish than expected. The main take away was the mention over the possible methods for unwinding of the Fed’s enormous balance sheet (aka QE), which has grown to some $4.5 trillion due to years of money printing. The initial reaction from the market was to buy USD but on reading the comments regarding the possible unwinding of QE, the USD experienced a slight sell off as some market participants view a shrinking of the balance sheet point towards another interest rate rise.
Earlier in the day, the ADP National Employment Report showed that US private companies created more jobs than expected last month with US private sector companies adding 263,000 new jobs to the economy following the preceding month’s downwardly revised gain of 245,000 and surpassing analysts’ expectations for an increase of 184,000. The ADP data comes ahead of the US Department of Labour’s more comprehensive report on Non-Farm Payrolls due tomorrow.
Other US data released on Wednesday revealed that growth in US management and support services slowed more than expected last month with the ISM Non-Manufacturing PMI coming in at 55.2 down from the prior month’s 57.6.
In the UK, yesterday’s PMI for British services surprised many experts, who did not expect any significant change in March. According to Markit, the PMI soared to 55.0 while analysts had forecasted a modest increase to 53.5. The PMI has now remained in growth territory for the eighth consecutive month and shows that activity in the British services sector rebounded from a five-month low registered in the previous month.
According to Markit, growth in UK services was attributable to greater customers’ demand and favourable conditions for overseas investors, such as the weak Pound. In fact, high demand on British services was recorded in the United States during the month of March.
Data Releases for the Remainder of the Week:
1.30 pm – US initial jobless claims (w/e 1 April): last week’s 258K reading expected to fall to 256K
7.00 am – German trade balance (February): previous figure was surplus of €14.8 billion
9.30 am – UK trade balance (March), industrial and manufacturing production (February): trade deficit expected to widen to £3.2 billion
1.30 pm – US non-farm payrolls and unemployment rate (March): 180K jobs expected to have been created, down from 235K a month earlier. Unemployment rate expected to hold at 4.7%
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