What’s been happening?

GBP: Tough times for the construction industry in March. UK Construction PMI came out yesterday morning missing expectation posting a figure of 47 for March from a previous reading of 51.4. The market had expected a softer figure, but not to this extent. The pound fell slightly on the back of this against the euro but was supported somewhat against the greenback due to dollar weakness.  The weaker than expected reading points to the fastest overall decline in construction since July 2016 as was attributed to the poor weather conditions and snow having an impact on engineering projects. 

EUR: It is looking increasingly unlikely that the ECB will see inflation rise to their 2% target figure prior to the end of Quantitative Easing (QE).  Eurozone CPI data released with annual inflation up to 1.4% from February's 1.1%, with the core figure staying at 1% for the third consecutive month. Even with the growth seen from this figure it has been confirmed by analysts that the ECB will struggle to reach its inflation target rate of 2% before the end of the quarter. French bank Societe Generale have also suggested that amongst the good growth that the Eurozone has seen over the past months, it will be hard for the ECB to see inflation rise to 2% before QE comes to a close. 

USD: Yesterday saw sterling climb once again against the dollar on the back of further trade concerns for the US, with China employing a tit for tat import taxes on the US. China stated that they would match the US by taxing $50 billion of US products to match the taxes imposed by the US on China. However, ADP data from the US late afternoon saw a posting of 245K well above the market expectation of 205K. This bodes well for Friday’s Non-farm figure and saw the dollar gain on the pound in the afternoon trading session. Further positive data was to follow out of the US in the form of Non-Manufacturing PMI and the dollar breathed a sigh of relief as Equity markets recovered.

What’s coming up?

GBP: Today we have the Markit services PMI for both the UK and Eurozone, with a reading of over 50 expected for both regions. UK and Eurozone. 

EUR: Eurozone CPI Flash Estimate YoY will be released at 10am. We also have Retail Sales out at 10am and it will be interesting to see how the eurozone reacts to last month’s slight drop by 0.1% following an already downward revision 1% drop in December last year. Eurozone data has not been strong of late and any further poor postings from the region could spur euro weakness.

USD: Later today will see the release of US Trade Balance and Initial Jobless Claims. The latter of these two releases is expected at 225k ahead of the Non-farm payroll figure tomorrow. The expectation is higher than the previous month which could signal another high Non-Farm reading to come on Friday. If so, expect the dollar to rally on the back of this. Generally, a posting above 200K for Non-Farm is considered as bullish and dollar positive. We also have Fed Bostic speaking later this evening at 6pm GMT. Markets will pay close attention for any clues regarding interest rates, but the general expectation is for a further rate rise to occur Dec 2018 (95% probability) or some time in Jan 2019 (96% probability).

RoW

AUD has recovered nicely after a rock few days on the back of trade war concerns. Aussie Trade Surplus figures came in at $825 million against the $700 million expectation with their Service Sector data also coming in with a positive jump.