Daily Market Report 01/05/2013

The US dollar was once again sold off in line with recent trading patterns losing almost 0.5% against the pound and the euro. This highlights the current sentiment in the market as fundamental data was broadly overlooked. UK consumer confidence failed to meet expectations and within the euro zone, unemployment figures have never been so high and inflation also came in well below expectations.

Once again, thoughts turned to the ECB and the possibility of a rate cut on Thursday. Opinion appears to be split as to whether or not it is too soon however Tuesday’s euro data would once again appear to support a cut in rates.

During Tuesday’s afternoon trading session, the euro clawed back some of the ground it had lost against the pound, ending the day 0.5% up where it rebounded off the current support levels as expected. Thursday’s interest rate decision from the ECB and the press conference that follows will inevitably spark more volatility. We may even see the US dollar pick up some impetus as investors take profits, protecting themselves in what seems to be becoming a bullish market.

Looking ahead to today, manufacturing figures from the UK and USA are due but once again, the UK’s figure is expected to indicate a contraction in this sector. Anything above and beyond expectations could see cable test resistance levels which will not have been reached since the middle of February. ADP unemployment data from the USA is released at 1.15pm, seen by some as a rough guide to the eagerly anticipated non-farm payrolls on Friday.

Later in the day, the FOMC interest rate decision is due however the likelihood of any change in US monetary policy including changes to the QE program in the states is small.

Key Announcements:

9.28am – GBP – Markit Manufacturing PMI (Apr): Expected to increase to 48.5 from the previous month.

13.15pm – USD – ADP Employment Change (Apr): Expected to contract to 150,000 from previous month.

15.00pm – USD – Construction Spending (Mar): Expected to contract to 0.7%.

15.00pm – USD – ISM Manufacturing PMI (Apr): Expected to contract to 50.9.

19.00pm – USD – Fed Interest Rate Decision: Expected to remain at 0.25%.

19.00pm – USD – Fed’s Monetary Policy Statement.