Daily Market Report 04/04/2013

Sterling rose against most of its peers yesterday on speculation that the Bank of England will maintain its current monetary stimulus program.

Construction activity rose to 47.2 in March from 46.8 in February but below the market expectations of 47.5. Although the markets initial reaction from these poor figures was to trade the pound lower, the pounds value soon increased with investors focusing on today’s key Bank of England interest rate monetary policy decision.

Markit Services PMI data is also due for release today, and as the services sector makes up for three quarters of the UK economy, investors may pay particular attention to this figure to get a better gauge of what the first estimate for the first quarter GDP figures may be at the end of April – i.e. will we, won’t we head for a triple dip recession?

The other focus on yesterday’s markets was the ADP payroll figures from the US. For what is usually a good precursor for the official non-farm payroll figures on Friday, the data showed that only 158,000 jobs were added in March against an expectation of 200,000. The US dollar weakened on the back of the news amid speculation that the Federal Reserve may not hurry to reduce their stimulus plan. To further sour the day for the US dollar, ISM Non-Manufacturing PMI fell below expectations coming in at 54.4 against an expected 55.8.

Euro zone inflation figures were also released yesterday showing a fall to 1.7% in March from February’s reading of 1.8%. However moves on the euro were limited as investors appeared to sit on the sidelines ahead of Mario Draghi’s press conference today at 1.30pm. There has been speculation this week that Draghi may use the conference to signal future plans for stimulus in the euro zone potentially in the form of a rate cut.

Today looks set to be a volatile day with Markit Services PMI figures released from across the euro zone and the UK, key announcements from the Bank of England and the European Central Bank and also a speech to be made by Federal Reserve’s Ben Bernanke where investors will look to take cues for a possible direction on US monetary policy.

Service sector figures from Germany and the euro zone have fallen below expectations also this morning.

Key Announcements:

9.28am – GBP – Markit Services PMI (Mar): Due to decrease to 51.5.

10.00am – EUR – Producer Price Index (Feb): Due to decrease to 1.5%.

12.00pm – GBP – BoE Interest Rate Decision and Asset Purchase Facility: Expected to remain the same.

12.30pm – USD – Initial Jobless Claims: Expected to fall to 350,000.

12.45pm – EUR – ECB Interest Rate Decision.

13.30pm – EUR – Monetary Policy Statement and Press Conference.

14.30pm – USD – Fed’s Bernanke Speech