Market Drivers April 03, 2017
Europe and Asia
AUD: Retail Sales -0.1% vs. 0.3%
GBP: UK Manufacturing PMI 54.2 vs. 55.1
EUR: EU PPI 0.0% vs. 0.2%
North America
CAD: Manufacturing PMI 9:30
USD: ISM Manufacturing 10:00
Cable and Aussie were both lower at the start of week’s trade as disappointing data knocked the two pairs for a loop sending the later below the .7600 figure and the former under the 1.2500 in early London trade.
In Australia the Retail Sales data missed badly printing at -0.1% versus 0.3% eyed as weak wage growth and higher debts weighed on consumer demand raising fears that the RBA may turn more dovish at its meeting tomorrow.
This was the second negative reading in three months and only the second negative reading in more than a year and a half suggesting that consumer demand in Australia is clearly slowing down. If the RBA chooses to address that fact the Aussie could see further weakness ahead with shorts targeting the key .7500 support level as their first target.
Meanwhile, in UK, the data was softer as well with UK Manufacturing PMI coming in at 54.2 versus 55.1. UK Manufacturing growth remains positive but has clearly lost momentum as higher costs begin to weigh on consumer demand.
According to Markit’s Rob Dobson, "The domestic market remained the primary source of new business wins for manufacturers. The boost to export demand from the historically weak sterling exchange rate also played a role, albeit to a lesser degree than in recent months. The impact of the exchange rate is still being keenly felt on the cost side. Although purchase price inflation moved further from January’s record high, it remained among the steepest recorded in the 25-year survey history.”
Cable recovered most of its losses by mid-morning London trading as the unit popped above the 1.2525 level. The market remains complacent about Brexit negotiations and generally upbeat about UK economic prospects, but that sentiment could quickly change if Wednesday’s UK PMI Services report which is far more important than today’s manufacturing data, comes in weaker as well. For now, 1.2550 is the resistance in the pair as the day proceeds.
In North America today, the heavy data week begins with ISM Manufacturing which is expected to come in just slightly softer at 57.2 versus 57.7. The preceding data has been mixed with lower Empire and Philly Fed reports but higher Chicago PMI readings. Overall the data is unlikely to have much impact on trade unless it deviates greatly from consensus. For now, the markets remain in a calm state of anticipation with little movement likely until traders get more visibility on employment data later in the week.