Daily Market Report - 04/03/2016

GBP

Early Thursday morning Sterling fell against the dollar and euro after the Services PMI index fell to its lowest in three years to 52.7 from 55.6 in February. With UK services a dominant force in the UK economy there are concerns that overall GDP in the first quarter of 2016 could weaken to just 0.3 percent the lowest level since late 2012.
 

USD

The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend continued to point to a strengthening labour market. Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 278,000 for the week ended Feb .Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for 52 straight weeks. That is the longest period since the early 1970s.
Orders to U.S. factories increased in January by the most in seven months, Factory orders rose 1.6 percent in January after two months of declines. It was the biggest jump since June, orders in a core sector that reflects business investment rose 3.4 percent — the sharpest one-month gain since June 2014.
U.S. manufacturers' exports have been hurt this year by spreading economic weakness overseas and by a strong dollar, which has made their goods less competitive. And a sharp fall in oil prices has hurt investment.
The somewhat positive jobs figure and strong factory orders was not enough to prevent a dollar sell off in the afternoon as the final Markit Services PMI figure posted its biggest contraction since October 2013 falling to 49.7.
This shows that both services and manufacturing have fallen in the US this month indicating the US economy may be showing some sign of distress, if this is the case it will make Janet Yellen and the Fed less likely to raise interest rates this month and talk of four interest rate hikes this year could be off the table in 2016.
 

OIL

Oil prices rose today, lifted by optimism that the market may have finally bottomed out after US production fell for the sixth week in row. Brent crude, the global benchmark, rose 0.7 per cent to $37.31 per barrel putting it on course to end the week with a gain of more than five per cent.
 
US oil inventories hit a new record of 517.98m barrels last week, but production fell for the sixth consecutive straight week to 9.08m barrels per day. Analysts expect banks will be more reluctant to make loans to cash-strapped shale producers. A key driver of lower prices is that Iran has vowed to continue pumping more oil, as it seeks to regain market share lost during years of economic sanctions.
 

Key Announcements

09:30 – GBP: UK Consumer Inflation expectations
13:30 – USD: US Unemployment Rate (Feb) expected to be unchanged at 4.9%
13:30 – USD: US Non-Farm Payrolls Expected to increase from 151K to 190K