Dollar still strong amidst a dovish FED Statement

Daily Update - 03rd May 2018

Yesterday’s Market

• EUR GDP Report, Unemployment Rate & Markit Manufacturing PMI
• USD Fed’s Monetary Policy Statement, Interest Rate Decision & ADP Employment Change

Yesterday Explained

The US Dollar got once again market's favor, underpinned by strong US data and rising yields. EU data, on the other hand, failed to impress, as preliminary Quarter 1 GDP figures came as expected at 0.4%, but below the previous quarter 0.6%.

In the US, the ADP survey showed that the private sector added 204,000 new jobs in April, slightly above the expected 200K. The US Central Bank has left its benchmark rate unchanged, as widely expected, while the statement was clearly less aggressive than expected, with no hints to a June hike and adding that inflation will run near their 2.0% target in the medium-term. Not hawkish as market wanted, but surely not a dovish statement.

Sterling slipped towards its lowest level since January as a stronger Dollar and concerns about Brexit related risks also expectations of Bank of England interest rate hike next month tumbling. Senior British lawmakers who backed Brexit had demanded that Prime Minister Theresa May drop a proposal for a customs partnership with European Union once it leaves the Bloc. That reignited concerns about a lack of British political unity about the Brexit talks and undermined the pound.

Today's Market

• EUR Consumer Price Index
• USD Trade Balance, Continuing & Initial Jobless Claims, Factory Orders & ISM Non-Manufacturing Index

Today’s Focus

Euro Zone Inflation figures will be the key market mover today. The ECB has a “single needle in the compass” – headline inflation. As of March, it stands at 1.3% year on year and is expected to remain unchanged in the preliminary read for April. However, core inflation is projected to drop from 1% to 0.9%. This may weigh on the euro and slow down the ECB’s exit from bond-buying.

From US we will see Trade Balance figures which a balance between exports and imports of total goods and services is. We will also get to see Jobs report along with Factory Orders which is measure of the total orders of durable and non-durable goods. The day will end with ISM Non-Manufacturing Index report for the services sector, which is the final hint towards Friday’s big event. The figure remained at a robust 58.8 points score in March, indicating further solid growth. A minor slowdown to 58.1 points is on the cards. The employment component provides further insight into hiring.