Weak UK Construction Sector PMI

The just out unexpectedly weak construction PMI numbers will raise some eyebrows about the strength of the nation’s housing market recovery, especially in the wake of the weak mortgage approvals data. Against the backdrop of the latest dismal manufacturing and construction PMI reports, tomorrow’s domestic services PMI print will gain considerable market attention. In the US, today’s private payrolls report will gain considerable market attention and is likely to give early indications into the strength of the nation’s labour market ahead of Friday’s non-farm payrolls numbers. In the Euro zone, talks continue to revolve around whether the ECB will offer hints of possibly adopting “ultra-loose” monetary policy measures during the course of the year at its policy meeting scheduled later this week.

Pound Sterling – UK Markets

The unexpected easing in domestic manufacturing activity for March pressurised the Pound against its major peers yesterday. The UK manufacturing activity expanded at its slowest pace in eight months, largely due to the weakness in overseas demand. However, Sterling’s losses against the greenback were limited following the release of weaker than expected US ISM manufacturing report for March. The Pound is trading firmer against the US Dollar in today’s trading session. Data released earlier today indicated that house prices in the nation, as measured by Nationwide, rose for the 15th consecutive month for February, although the rise was lower than market forecasts. The steady increase in house prices over the past few months indicates that the domestic housing market recovery continues to remain on track. However, the just out domestic construction PMI report has missed market expectations for March, thereby shifting market focus to tomorrow’s services PMI report which is expected to reveal a mostly unchanged reading for March. Going forward today, markets will keep a tab on US ADP employment numbers for further cues to risk appetite.

US Dollar – US Markets

The US Dollar traded lower against the common currency yesterday tracking some encouraging European macroeconomic data. Further the weaker than expected ISM manufacturing print did little to lift market sentiment towards the greenback. However, the ISM report indicated that manufacturing activity accelerated for March, mainly driven by an improvement in production and new orders, thus suggesting that the economy is slowly recovering from its winter related impact. In the wake of comments from the Fed Chief, Janet Yellen, earlier this week wherein she stated that the US central bank would extend its monetary commitment for some more time citing the weak domestic labour market, today’s ADP employment figures will help investors to gauge the improvement in the US labour market ahead of the non-farm payrolls report due later this week. The greenback is trading in a tight range against its peers in today’s trading session. Along with today’s ADP employment data, investors in the Euro-US Dollar will keep a tab on the US factory orders report which is likely to show a rebound for February. Additionally, speeches from Fed officials will also be eyed for further direction.

Euro – European Markets

With market participants remaining focused on the stance that the ECB might adopt in 2014, the latest inflation reading has further triggered a fresh round of speculation that the central bank’s policymakers will be inclined to adopt unorthodox measures this year. The underlying view received a boost, after the ECB Vice-President, Vitor Constancio, conceded that low inflation was a concern and could be a drag on economic growth. However, the Euro closed firmer against its major counterparts yesterday, as the latest PMI data further confirmed that manufacturing activity in the peripheral Euro zone economies has witnessed a considerable rebound following the weakness seen during the region’s debt crisis. Meanwhile, the number of people unemployed in Germany fell for the fourth consecutive month for March. However, the Euro bloc’s unemployment rate remained at elevated levels, thus highlighting that the region’s economic recovery is not sufficiently strong to create enough new jobs. The Euro is range bound against the greenback this morning. With a light macroeconomic calendar across Europe today, investors will keep a tab on Euro zone producer price inflation numbers.

Other Currencies – Highlights

The Japanese Yen is trading lower, albeit in a tight range, against the majors in today’s trading session following the release of a survey report by the Bank of Japan which indicated that consumers and corporates in the nation are less optimistic about the central bank achieving its 2% inflation target by next year, especially in the wake of the 3% sales tax hike which came into effect from yesterday. The soft consumer and corporate inflation expectations are likely to boost market expectations for a further round of stimulus measures by the BoJ as it attempts to support domestic economic growth and stave off deflation. With little on the domestic macro front for the rest of the week, news flows emanating from both sides of the Atlantic, particularly the US labour market and the Euro zone monetary policy meeting, will prove crucial for the Japanese Yen against the majors in the near term.