Past Events
• USD ISM Non-Manufacturing PMI, out at 55.4 versus expected 54.1, prior 53.0
• USD Pending Home Sales, out at 8.2% versus expected -0.5%, prior -7.8% (revised)
• Bank Holiday France, Germany, Italy, UK, Canada, Switzerland, Australia and New Zealand
Upcoming Events
• USD Fed Chair Ben Bernanke Speaks (1730 GMT)
• GBP Nationwide Consumer Confidence (2300 GMT)
• GBP Services PMI (0830 GMT)
• EUR Final GDP q/q (0900 GMT)
• EUR German Factory Orders m/m (1000 GMT)
• CAD Building Permits m/m (1230 GMT)
• CAD Ivey PMI (1400 GMT)
Market Commentary
US service industries expanded in March at the fastest pace since May 2006 indicating that the recovery in the US economy has spread beyond the manufacturing sector and is creating jobs. The Institute for Supply Management’s index of non-manufacturing businesses, which comprise almost 90% of the economy, rose to 55.4, a bigger jump than expected and up from 53.0 the previous month. The pace of orders to service industries rose to the highest level since 2005, while backlogs were the highest since August 2007, indicating companies were having trouble meeting demand.
On Friday the US Labor Department said that employers increased payrolls by 162,000 workers last month, the third gain in five months and the largest since March 2007, indicating that companies are increasingly confident regarding economic recovery. Sustained employment gains would boost incomes leading to increased consumer spending which accounts for about 70% of the economy. James O Sullivan, chief economist at MF Global Ltd said “the recovery is looking increasingly self sustaining”.
Also yesterday a report by the National Association of Realtors showed that pending home sales in February jumped the most since 2001. The index of purchase agreements, or pending home sales, rose to 8.2%, the second biggest gain on record and the largest since October 2001. Buyers may be taking advantage of a tax credit that requires contracts to be signed by the end of April, indicating that the market might soon see a rebound in sales.
“Some of this may be an increase in activity ahead of the prospect of the expiration of the homebuyer tax credit,” said Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York. Even so, “if what we’re seeing in the labor market is actually showing decent growth, then I would expect housing would follow.”
Pending sales are considered a leading indicator because they track contract signings. The Realtors’ existing-home sales report tallies closings, which typically occur a month or two later. The pending sales data goes back as far as January 2001.
North of the border in Canada the Loonie again moved closer to parity last week on the back of rising crude oil prices. Oil prices have been rising amid growing optimism that improved US job creation will boost economic recovery and lead to higher demand for crude oil. World oil prices have been on an upward trend partly because of signs of improvement in the US economy, but also because of a weak US Dollar which tends to increase prices of commodities priced in that currency.
Yesterday the Canadian Dollar rose by 0.60% against its American counterpart closing at CAD 1.0019.
Tomorrow will bring the release of Canadian building permits. Permits made a huge jump four month ago before returning to normal. After a fall of 4.9%, permits are expected to rise by 2.1% this time and may give a boost to the currency. Also out tomorrow is the Ivey PMI. This index has shown that the Canadian economy has expanded in the last two months. This time it is expected to show a rise from 51.9 points to 55.1 points.
In the UK, nationwide consumer confidence figures will be published later tonight. The results of this survey were quite good last time, it rose to 80 points, the highest in two years. This time it is expected to show a further small increase. Early tomorrow the services PMI will be released. The service sector in the UK is doing very well, the last time the index showed an increase to 58.4 points, this time it is expected to have come down slightly to 58.2 points.
The Pound ended trading last week by climbing 0.55% against the US Dollar on Friday to end the week at GBP 1.5204. Yesterday against the US Dollar the Pound dropped 0.18% closing at GBP 1.5296. Against the Euro Sterling closed last week up overall and continued to rise yesterday, gaining 0.24% on the Euro to close at GBP 0.8815.
In other news in theUK, Prime Minister Gordon Brown looks set to call a general election for May 6th. The outcome of the vote may determine how quickly Britain can reduce its record budget deficit and trim national debt which looks set to double. If the election fails to result in any one party having a majority and produces a so called hung parliament investors and economists say the government may be too weak to fix the nation’s finances and this may also put the UK’s triple AAA credit rating at risk.
“The markets hate the uncertainty of the possibility of a hung parliament or the possibility of the political parties having to work in a coalition,” said Mark Wickham-Jones, professor of politics at Bristol University. “If no one is in overall control, it will make cutting the deficit difficult because the politics will push it to one side.” This year Sterling has had its worst annual start on the forex market in 13 years, down 2.8% against the US Dollar since the beginning of the year, amid uncertainty about the possible outcome of the general election.
In the Euro Zone, last weeks recovery by the Euro against the US Dollar prompted by the announcement of the long awaited bailout package for Greece seems to be maintaining course. On the market yesterday the Euro gained 0.48% on the US Dollar and closed the day at EUR 1.3422.
The final European GDP is due to be published tomorrow morning. The figure is expected to confirm the limited growth rate of 0.1% in the fourth quarter. The German economy, the Euro Zones largest did not grow at all in the fourth quarter. Also tomorrow German factory orders will be published. The last report surprised the market with a large increase in orders of 4.3%. This time it is expected to show a small decrease.
Written by Finexo.com
