The Dollar could come under pressure later in the week if US payrolls data disappoints, and if the Bank of England raises interest rates on Thursday, a move that would diminish the Dollar’s yield’s advantage. Bank of England rate decision due on Thursday: most analysts expect the BoE to hold at its policy meeting, but markets are pricing in a 40% chance that the Central Bank will raise rates from 5.25%, bringing them above the US Federal Funds rate. ISM was a bit disappointing after the large upside surprise in Chicago PMI and looks as upward pressure on inflation would likely lead the Federal Reserve to hold back from cutting interest rates from the current level of 5.25% any time soon.
News and Events:
The Dollar held steady against the Euro and the Sterling with the market focused on Friday’s US jobs data for March and this week other economic data for clues on when the Federal Reserve might cut interest rates. Some analysts said the Dollar could come under pressure later in the week if US payrolls data disappoints, and if the Bank of England raises interest rates on Thursday, a move that would diminish the Dollar’s yield’s advantage.
The US ISM Manufacturing Index dropped back a little further than expected to 50.9 in March, from 52.3. The consensus was 51.4, but the big jump in the Chicago PMI late last week probably raised expectations ahead. Some weakness was seen in the New Orders, Production and Employment indexes. The employment index declined to a near 2-year low of 48.7, from 51.1. The Price Paid index, which measures inflationary pressures in manufacturing, climbed to its highest since August at 65.5 vs 59. Upward pressure on inflation would likely lead the Federal Reserve to hold back from cutting interest rates from the current level of 5.25% any time soon. Analyst said ISM was a bit disappointing after the large upside surprise in Chicago PMI.
The Euro-zone PMI Manufacturing slowed slightly in March. The data left intact expectations that the ECB would raise rates as early as June.
EurUsd rose 0.12% to 1.3372 near the two-year high 1.3412. UsdJpy was fairly unchanged at 117.86 while the EurJpy rose 0.15% at 157.59. GbpUsd jumped up 0.54% to 1.9784 testing 1.9801 intraday high. AudUsd was the biggest daily performer up 0.95% to 0.8163 hitting a 10-year high of 0.8183. Reserve Bank of Australia may raise interest rates on Wednesday.
Bank of England rate decision due on Thursday: most analysts expect the BoE to hold at its policy meeting, but markets are pricing in a 40% chance that the Central Bank will raise rates from 5.25%, bringing them above the US Federal Funds rate.
Today’s Key Issues:
EUR 09:00 GMT: ECB’s Liebscher speaks in Vienna
GB 09:30 GMT: March Purchasing Managers Index Construction 57.5 vs 57.3
CHF 09:30 GMT: KoF holds Media Conference on Economic Outlook
EUR 10:00 GMT: Euro-zone Producer Price Index 0.3% vs 0.1% (MoM) and 2.7% vs 2.9% (YoY)
US 13:55 GMT: Redbook March 31 previously 0.7%
US 15:00 GMT: February Home Sales 0.2% vs 4.1% (MoM)
AUD 00:30 GMT: March AIG Performance of Service Index previously 54.5,
Reserve Bank of Australia Rate Decision expected 6.25% unchanged
The Risk Today:
EurUsd posted further advance above 1.3260 rebound and a break of this support looks unlikely to trigger a fresh round of weakness opening 1.3200 (61.8% retracement of the 1.3072-1.3412 rally). A break there would open the risk down toward 1.3180. Focus remains on the 1.3411 trend high from previous week, with strong resistance at the 1.3480 reaction March 11 high.
GbpUsd outlook remains positive as market broke up 1.9750 former resistance. This positive trend might extend near 1.9850, where there is little resistance until the 1.9917 late January high. Initial support is 1.9750 (former resistance) followed by 1.9582 and 1.9571.
UsdJpy consolidation phase continues to hold below the 118.50 to 118.98 resistance band keeping the broader bearish tone intact. Recent downward pressure from last week 118.44 high will need to break down 116.37 to clear the way for a run at the 115.15 trend low from early March. Initial support is 117.17.
UsdChf is holding below resistance at 1.2230 and last Friday’s high 1.2240. But it will take a break of the 1.2080 to mark a return of the broader bear trend and open the door toward its 1.2030. Lower than that, there is little support till the 1.1881 early December low. On the topside, a break of 1.2230 would instead reinstate a short-term bullish theme.
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Resistance and Support:
