ISM services numbers in the afternoon showed that the sector is still growing, but not as much as expected. Diving into the details the numbers showed that job concerns could be mounting, as companies look to trim their workforce. USD weakened as a result, taking GBPUSD to a 1-month high and EURUSD back to the highs seen on the 22nd February. Earlier in the day EU PMIs were revised higher, whilst UK PMIs were revised lower for February.
*Daily move - against G10 rates at 7:30am, 06.03.24
** Indicative rates - interbank rates at 7:30am, 06.03.24
We have the first set of job numbers this afternoon, with the ADP report expected to show an increase of jobs of 150,000 in February, and the JOLTS job openings.
Yesterday’s ISM services employment numbers highlighted that perhaps there are signs that the US job market was weakening, leading to a weaker USD. Should today’s numbers illustrate the same, then we could well see further USD weakness ahead of Fed Powell's testimony in congress this evening and Friday’s job numbers.
The UK budget will be presented at 12.30pm today. Early reports suggest that Jeremy Hunt will be offering another cut in National Insurance as opposed to cuts in income tax. With regards to GBP performance today, the key metric will be whether what's said in the budget will bring in inflationary pressures onto the economy. If so, then of course this will likely lead to markets pricing a further delay in any rate cuts by the BoE, which in turn will be GBP positive.
The Bank of Canada’s interest rate decision is released at 2.45pm, with expectations that rates will remain at 5%, but we could see some reference to upcoming rate cuts leading to a weaker CAD.
Early doors, JPY has been gaining on the view from MUFG Bank that they believe its necessary to end negative interest rates in March as opposed to April.
For GBPUSD clients buying USD, it could be worth targeting the 2024 highs on any short-term volatility from the budget, as well as the US job numbers today.
Demand to drive GBPUSD higher was seemingly warranted on the back of weaker job numbers from the US yesterday, and what this means for job numbers today and on Friday. Add to this, the expectations that today’s Spring Budget could add to inflationary pressures in the UK, suggests that we could see another attempt at the 2024 highs for GBPUSD.
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