03/03/2017 - US Rate Hike on Cards as Jobless Rate Falls to 44 Year Low

USD

The Dollar strengthened after initial claims for state unemployment benefits fell to near a 44-year-low last week, pointing to further tightening in the labour market even as economic growth appears to have remained moderate in the first quarter.

The unemployment benefits dropped to its lowest level since March 1973 which was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labour market.

With many analysts beginning to speculate that the Federal Reserve could raise interest rates at its March 14-15 policy meeting due to the combination of the strong Labour market and rising inflation.

GBP

A Construction Purchasing Managers' Index (PMI) survey showed that Growth across Britain's construction industry picked up slightly in February, driven by the civil engineering sector, though a slowdown in new orders and soaring costs added to mixed signals for the economy. 

The improved performance from engineering firms outweighed growth in housebuilding which cooled to a six-month low and commercial construction contracted for the first time in four months. Economists remained cautious over the figure as construction accounts for around 6 percent of British economic output, a fraction of the size of the dominant services industry.

A report released by Lloyds bank yesterday found that  Britain's smaller companies are holding onto cash and cutting investment, a worrying sign that  business confidence starting is to wobble as the government sets the wheels in motion to leave the European Union. 

Companies with revenue of less than 1 million pounds expect to invest an average of 21,690 pounds in their businesses in the next six months  a fall of 74 percent compared with July. The biggest drop since the bank added the question about investment plans back in  2015.

EUR

Eurozone inflation has risen above the European Central Bank's (ECB) target rate for the first time in four years. Inflation hit 2% in February,  up from a rate of 1.8% in January and the highest level since Jan 2013. The increase in inflation is largely due to rising energy prices, with most analysts not expecting the ECB to alter its current stimulus program.

Key Announcements

09:30 – GBP: UK Services PMI is expected to call to 54.2

15:00 – USD : ISM Non-Manufacturing PMI is expected to remain at 56.5

18:00 – USD : US Fed Chair Janet Yellen Speaks