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Forex: Pound May Bounce on PMI Data, Euro to Look Past PPI Drop

Forex: Pound May Bounce on PMI Data, Euro to Look Past PPI Drop

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound Hoping for a Lifeline in Construction PMI Uptick
  • Euro Unlikely to See Strong Response to Another Soft PPI Print
  • US Dollar Eyeing ADP Jobs Data for Near-Term Direction Cues

The UK Construction PMI report headlines a quiet European economic calendar. Expectations suggest the pace of activity growth in the house-building sector narrowly accelerated in March. The British Pound has shown itself responsive to economic activity data and its implications for BOE policy bets: the currency slid alongside the benchmark 10-year Gilt yield yesterday in the wake of a disappointing Manufacturing PMI release. With that in mind, an upbeat result on today’s report may offer Sterling a lifeline, although technical positioning is looking a bit ominous after yesterday’s selloff.

Meanwhile, Eurozone PPI figures are due to show wholesale inflation sunk deeper into negative territory, with the year-on-year rate expected to have edged down to a four-year low at -1.6 percent in February. While increasingly worrying cues on the price growth front might be expected to stoke ECB stimulus bets and weigh on the Euro, a strong response from price action seems unlikely as today’s report comes across the wires. Indeed, if this week’s soft CPI data – an outcome more directly geared to the policy outlook – was unable to shake the single currency, the lower-impact PPI report is unlikely to spark momentum.

Later in the day, the spotlight turns to the US ADP Employment Change number as speculators look for clues ahead of Friday’s official jobs report. The payrolls company is expected to report the world’s top economy added 195,000 jobs in March, marking the largest increase in four months. That might fuel hopes for an upbeat Nonfarm Payrolls reading on tap later in the week, eroding doubts about the continuity of the Fed’s efforts to “taper” QE asset purchases and boost the US Dollar.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Monetary Base (YoY) (MAR)

54.8%

-

55.7%

23:50

JPY

Monetary Base - End of Period (MAR)

¥219.9T

-

¥204.8T

0:00

NZD

ANZ Commodity Price (MAR)

-0.1%

-

0.9%

0:30

AUD

Job Vacancies (FEB)

2.6%

-

-1.7%

3:30

AUD

Building Approvals (MoM) (FEB)

-5.0%

-2.0%

6.9%

3:30

AUD

Building Approvals (YoY) (FEB)

23.2%

27.9%

34.6%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

GBP

Nationwide House Prices (MoM) (MAR)

0.4% (A)

0.7%

Low

6:00

GBP

Nationwide House Prices (YoY) (MAR)

9.5% (A)

9.4%

Low

8:30

GBP

Markit/CIPS UK Construction PMI (MAR)

63.0

62.6

Medium

9:00

EUR

Euro-Zone PPI (MoM) (FEB)

-0.1%

-0.4%

Low

9:00

EUR

Euro-Zone PPI (YoY) (FEB)

-1.6%

-1.4%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3700

1.3746

1.3770

1.3792

1.3816

1.3838

1.3884

GBP/USD

1.6529

1.6585

1.6607

1.6641

1.6663

1.6697

1.6753

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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