UK PMI services declined to 34.5 in the final March, down from previous estimates of 35.7 and February’s 53.2. The composite PMI declined sharply to 36.0 from 53.0; the weakest reading on record. Both results indicate a rapid deterioration in confidence and the overall economy throughout March. Sterling ceded ground throughout Friday as confidence in the UK and global economic outlook deteriorated. The Pound slipped to 1.2200 on the Dollar before correcting to 1.2270 while the Euro recovered to the 1.1363 area.
Futures market data bets on the Pound rising had fallen further, now just above 5,000 contracts, but there is little scope for UK currency buying. In late evening, Sterling fell on reports that Boris Johnson was admitted to hospital with coronavirus symptoms. UK GfK consumer confidence for March showed a steep decline to -34 from -7. Sterling opens on the defensive, but appears supported below 1.2250 against the Dollar.
US non-farm payrolls declined 701,000 for March, much steeper than the expected drop of around 100,000 and following a revised 275,000 increase the previous month as the coronavirus, the outbreak had a larger than expected impact. There was a very sharp decline in employment within the leisure sector due to travel restrictions and healthcare jobs surprisingly dropped. The unemployment rate increased to 4.4% from 3.5% previously, the sharpest one-month increase since 1975, while weekly hours also declined. Given the surge in jobless claims, there are expectations that the unemployment rate could reach 10% within two months.
The dollar posted net gains despite the fragile jobs report as attractions of high liquidity and lack of attractive significant alternatives within the currency markets continued to support the US dollar.
The ISM non-manufacturing index declined to 53.5 for March from 57.3 the previous month as activity declined for the first time in over 10 years. Employment also fell for the month, and the headline figure was artificially supported by much longer supplier delivery times.
The final Euro-zone PMI services sector index declined from 28.4 4 to a reading of 26.4 and close to half the reading of 52.6 for February. The composite index registered the sharpest monthly decline on record and also marked a series low. Only the Irish index resisted a record low for the month, maintaining concerns over the near-term Eurozone outlook with the Euro unable to make headway.
CFTC data recorded a further net increase in long Euro positions to over 74,000, maintaining the risk of long liquidation with credible sourcing reports suggesting Italy was considering how to start easing restrictions from the middle of May. As of writing the Euro trades just above the 1.08 against the Dollar.
Posted in Daily Market News on Apr 6 2020