Swiss Franc and Euro jump in overall mixed markets. There were little reaction to better than expected job data from the US. BoE’s slowing of asset purchases, and surprising voting prompted brief rally in the Pound, but there is no follow through momentum. Australian Dollar quickly pared back the losses on increasing tension with China. European indices are hovering between gains an losses while US futures are mixed too. Traders might need to wait for tomorrow’s non-farm payroll data before taking a firmer stance.
Technically, though, Dollar is looking vulnerable against Euro and Swiss Franc. With today’s recovery, focus will firstly be on 1.2075 minor resistance in EUR/USD. Break will suggest that correction from 1.2149 has completed, and larger up trend is ready to resume. USD/CHF is also pressing 0.9079 temporary low too. Break will resume larger down trend. We’d also watch is gold could finally break through 1800 handle to resume the rise from 1677.69.
In Europe, at the time of writing, FTSE is up 0.16%. DAX is down -0.07%. CAC is up 0.06%. Germany 10-year yield is up 0.008 to -0.217. Earlier in Asia, Nikkei rose 1.80%. Hong Kong HSI rose 0.77%. China Shanghai SSE dropped -0.16%. Singapore Strait Times rose 0.62%. Japan 10-year JGB yield dropped -0.0054 to 0.090.
US initial jobless claims dropped to 498k, lowest since March 14, 2020
US initial jobless claims dropped -92k to 498k in the week ending May 1, below expectation of 540k. That’s also the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -61k to 560k, lowest since March 13, 2020 too.
Continuing claims rose 37k to 3690k in the week end April 24. Four-week moving average of continuing claims dropped -6.8k to 3676k, lowest since March 28, 2020.
BoE stands pat, but Haldane voted to cut asset purchases
BoE kept monetary policy unchanged as widely expected. Bank rate is held at 0.10% on unanimous vote. Asset purchase target was kept at GBP 895B in total. Chief economist Andy Haldane surprisingly dissented, “preferring to continue with the existing programme of UK government bond purchases but to reduce the target for the stock of these purchases from £875 billion to £825 billion.”
The MPC will “continue to monitor the situation closely” and taken whatever action is necessary”. Also, “the Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”
The central bank said economic activity is expected to “rise sharply” in Q2 and GDP would recovery to pre-Covid level “over the remainder of this year”, in absence of most restrictions.
In the economic projections conditioned on constant interest rate at 0.10%, 2021 GDP growth growth is upgrade to 7.25% (from 5.0%). But 2022 projection was lowed to 5.75% (down from 7.25%). Growth is expected to slow back to 1.25% in 2023.
CPI inflation forecast was raised to 2.50% in 2021 (from 2%), lowered to 2% in 2022 (from 2.25%), and kept unchanged at 2.0% (2023).
Suggested reading on BoE: Bank of England Eases Foot Off Monetary Policy Accelerator
UK PMI services finalized at 61.0, surge of pent up demand started to flow through
UK PMI Services was finalized at 61.0 in April, up from March’s 56.3. That’s also the highest reading since October 2013. Job created accelerated to five-and-a half year high. Input cost inflation also intensified. PMI Composite was finalized at 60.7, up from March’s 56.4, a seven-and-a-half year high.
Tim Moore, Economics Director at IHS Markit: “April data illustrates that a surge of pent up demand has started to flow through the UK economy following the loosening of pandemic restrictions, which lifted private sector growth to its highest since October 2013. The roadmap for reopening leisure, hospitality and other customer-facing activities resulted in