According to the report from IHS Markit/CIPS, the performance of the UK service sector strengthened again during April, driven by sharp increases in business and consumer spending. Survey respondents widely attributed the improvement in demand to looser pandemic restrictions and high levels of optimism regarding the near-term economic outlook. Confidence in the sustainability of the recovery was also reflected in greater staff hiring, with employment growth accelerating to its fastest since October 2015.
Adjusted for seasonal influences, the headline UK Services PMI Business Activity Index registered 61.0 in April, up from 56.3 in March and the highest since October 2013. The final reading was also above the earlier 'flash' estimate for April (60.1).
Service providers noted that the roadmap for easing COVID-19 restrictions across the UK had been a key factor helping to boost activity. There was a direct boost to output from the reopening of some customer-facing parts of the economy in April, as well as a positive impact on the rest of the service sector due to improving business and consumer confidence.
New order volumes increased for the second month running in April and the rate of expansion was the steepest since December 2013. Service providers reported that the improved pandemic situation and strong optimism towards the UK economic outlook had led to a sharp rise in forward bookings and new projects starts.
Looking ahead, service sector firms overwhelmingly anticipate an upturn in business activity during the next 12 months. Around 65% of the survey panel forecast an expansion, while only 7% predict a decline. The resulting business expectations index was only fractionally lower than March's 14-year peak.
FXStreet reports that Westpac said that the Fed’s resolutely dovish stance and growing Eurozone rebound optimism leave DXY soft in Q2.
“DXY’s near-term fate rests entirely with the April payrolls report. Few will be surprised by a 1.5-2 M payrolls increase, making for an incredibly high bar to resuscitate the US macro outperformance trade, especially with Europe getting her vax act together and reopenings gathering pace. A sub-1mn payrolls print could be devastating for near term USD prospects.”
“Until there’s further ‘substantial progress’ in clawing back 8mn+ in pandemic job losses a near united dovish Fed front should prevail for some months yet, undercutting DXY upside potential.”
Reuters reports that U.S. Secretary of State Antony Blinken said the West had to be very careful about the exact nature of Chinese investment in Western economies and think very carefully about investments in strategic assets.
Asked by the BBC if the West should pull back from Chinese investment, Blinken said the United States was not trying to hold China back or contain it but that the West wanted to uphold the rules-based international order formed after World War Two.
"I think we have to be very careful about exactly what the nature is of that investment," Blinken told when asked about huge amounts of Chinese investment in the West.
"If it is investing in strategic industries, strategic assets that's something that countries need to look at very carefully."
He added though: "Another thing is to say: 'We're not doing any business'. That's not what we're saying."
While China's re-emergence has concerned the West, China was for centuries one of the most influential economies on earth.
According to the report from IHS Markit, the Eurozone Construction Total Activity Index was unchanged at 50.1 in April, signalling a fractional expansion in eurozone construction activity for the second successive month. Firms often linked this to a resumption of work on paused projects, although were increasingly concerned about the impact that renewed COVID-19 restrictions had on overall demand in the construction sector. April data pointed to a further rise in home building activity, as well as a softer reduction in commercial construction. Civil engineering work, meanwhile, fell at a faster pace in April.
Work undertaken on housing by eurozone construction firms increased for a second successive month in April. The rate of growth quickened from March and was the strongest recorded since February 2020.
Commercial construction activity contracted again in the latest survey period, extending the current sequence of decline to 14 months. That said, the pace of the reduction eased from March and was the softest in the sequence.
The downturn in eurozone civil engineering activity continued in April, as work undertaken on infrastructure projects contracted at a modest pace. The rate of the decline quickened from March and was the twenty-first in as many months.
The degree of optimism regarding the outlook for activity over the coming 12 months eased in April, and was the softest recorded for three months. German constructors signalled renewed pessimism regarding the year ahead outlook, with projections at their weakest since December 2020. French firms indicated a lower level of positive sentiment, though Italian firms signalled the strongest projections since August 2001.
FXStreet reports that Jane Foley, Senior FX Strategist at Rabobank, expects the inflation debate to drag EUR/USD down to 1.19 over the next month.
“With the market consensus pointing to a 995K rise for the April Nonfarm Payroll number and with several forecasters expecting a number well above 1,000K, the USD may continue to find a good level of support in the near-term.”
“Beyond the end of this week, the USD is likely to continue to respond to the debate about whether or not the Fed’s view that inflation will be transitory is correct. Given the market’s sensitivity to the issue, we see risk that the inflation debate will take EUR/USD back to 1.19 on a one-month view.”
|01:00||New Zealand||ANZ Business Confidence||May||-2.0||7.0|
|06:00||Germany||Factory Orders s.a. (MoM)||March||1.4%||1.7%||3%|
During today's Asian trading, the US dollar declined against the euro and the yen, and was almost unchanged against the pound.
The US dollar index is near a two-week high after US Treasury Secretary Janet Yellen said on Tuesday that the Federal Reserve may have to raise interest rates to avoid overheating the US economy. Later, Yellen noted that she is not trying to make forecasts about the Fed's policy, nor to make recommendations to the Fed.
John Hardy, chief currency strategist at Saxo Bank, notes that interest rate expectations in the market on Tuesday after Yellen's statement almost did not move - the market expects a Fed rate hike sometime at the end of the third or fourth quarter of next year.
The pound is stable against the dollar and the euro. Traders are waiting for the results of the Bank of England meeting, which will be announced on Thursday at 11:00 GMT. Analysts do not predict changes in the parameters of the monetary policy of the Bank of England. At the same time, the Bank of England is expected to improve its economic forecast.
The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.11%.
eFXdata reports that Citi outlines its expectations for Thursday’s Scottish Parliamentary election, and BoE policy meeting.
"With no overnight counting, event risk is likely to persist into this weekend. The SNP is likely to be the biggest party, but whether they achieve an outright majority remains relevant for GBP. Concerns about another independence referendum could weigh on GBP into and after the event, but GBP weakness on risk reduction into political uncertainty should be faded," Citi notes.
"We see a reasonable chance that the BoE do message a technical QE taper. We also see plenty of reasons to wait. We think FX is only going to care if the nature of the ‘taper or no taper’ debate at the April meeting bears much relevance to the overall direction of monetary policy," Citi adds.
According to provisional results of the Federal Statistical Office (Destatis), real (price adjusted) new orders increased by a seasonally and calendar adjusted 3.0% in March 2021 compared with February 2021. Economists had expected a 1.7% increase. Excluding major orders, real new orders in manufacturing were 1.6% higher than in the previous month.
Compared with February 2020, which was the month before restrictions were imposed due to the corona pandemic in Germany, new orders in March 2021 were 9.1% higher in seasonally and calendar adjusted terms.
Domestic orders increased by 4.9% and foreign orders went up by 1.6% in March 2021 on the previous month. New orders from the euro area increased 0.7%, and new orders from other countries rose by 2.2% compared with February 2021.
In March 2021, the manufacturers of intermediate goods saw new orders increase by 2.8% compared with February 2021. The manufacturers of capital goods saw an increase of 2.5% on the previous month. Regarding consumer goods, new orders rose by 8.5%.
For February 2021, the revision of the preliminary outcome resulted in an increase of 1.4% compared with January 2021 (provisional: +1.2%).
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2006
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 60597 contracts (according to data from May, 5) with the maximum number of contracts with strike price $1,1700 (3068);
Price at time of writing this review: $1.3906
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date May, 7 is 11309 contracts, with the maximum number of contracts with strike price $1,4200 (2932);
- Overall open interest on the PUT options with the expiration date May, 7 is 19223 contracts, with the maximum number of contracts with strike price $1,3700 (2038);
- The ratio of PUT/CALL was 1.70 versus 1.68 from the previous trading day according to data from May, 5
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
|Raw materials||Closed||Change, %|
|01:00 (GMT)||New Zealand||ANZ Business Confidence||May||-2.0|
|06:00 (GMT)||Germany||Factory Orders s.a. (MoM)||March||1.2%||1.7%|
|08:30 (GMT)||United Kingdom||Purchasing Manager Index Services||April||56.3||60.1|
|09:00 (GMT)||Australia||RBA Assist Gov Debelle Speaks|
|09:00 (GMT)||Eurozone||Retail Sales (YoY)||March||-2.9%||9.6%|
|09:00 (GMT)||Eurozone||Retail Sales (MoM)||March||3%||1.5%|
|11:00 (GMT)||United Kingdom||Asset Purchase Facility||875||875|
|11:00 (GMT)||United Kingdom||BoE Interest Rate Decision||0.1%||0.1%|
|11:00 (GMT)||United Kingdom||Bank of England Minutes|
|12:30 (GMT)||U.S.||Continuing Jobless Claims||April||3660||3620|
|12:30 (GMT)||U.S.||Unit Labor Costs, q/q||Quarter I||6%||-0.8%|
|12:30 (GMT)||U.S.||Nonfarm Productivity, q/q||Quarter I||-4.2%||4.3%|
|12:30 (GMT)||U.S.||Initial Jobless Claims||May||553||540|
|13:00 (GMT)||U.S.||FOMC Member Williams Speaks|
|17:00 (GMT)||U.S.||FOMC Member Bostic Speaks|
|17:00 (GMT)||U.S.||FOMC Member Mester Speaks|
|22:05 (GMT)||U.S.||FOMC Member Kaplan Speak|
|22:30 (GMT)||Australia||AIG Services Index||April||58.7|
|23:30 (GMT)||Japan||Labor Cash Earnings, YoY||March||-0.2%|
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