Caution is side-lined in the markets

6 April, 2017

Caution is side-lined in the markets

The UK PMI index in the services sector exceeded expectations rising to 55.0 points against the 53.5 points forecast indicating expansions in the sector, and denying rumours that Brexit imposes a negative influence on the economy. The composite index grew to 54.7 points, against a consensus of 53.8 points. The data in the service sector is under the magnifying glass for the markets, given that this sector accounts for 78% of the total GDP and its state comprehensively reflects the economic poise amid the current political wobbling associated with Brexit. Investors are also closely watching the transformation of the country’s financial sector, which has lost close ties with the mainland, as part of the bankers have already begun to pack their bags.

The British currency reacted with growth to the strong statistics, but it could be a disguise for the bears, that they are building up positions before the Brexit talks gained real results. It is important to remember that the danger of withdrawing from the EU won’t bespeak immediate crisis, so wagering on the rally should be taken with caution especially at the time the outcome is brought to the public. In the near future, the outlook remains bearish with a target of 1.22-1.23.

The Oil prices added one percent after the release of positive data about the US inventories. The API agency showed that the reserves fell by 1.83M barrels, soothing the investors’ concerns that OPEC’s efforts to cut production could be offset by the US production growth. WTI and Brent added one percent, creating a basis for a long-term recovery in the range of $55-60 per barrel.

The publication of the FOMC protocol triggered a small sell-off of the Dollar. The index retreated by 0.1%, however, the investors’ expectation of a more hawkish forecast supported by the strong economic data is likely to set the trajectory of the Dollar to the target of 101. For now, the futures on the rate price is at 59% chance of a rise in June.

The release of the upbeat figures on employment in the US by ADP spurs risk appetite on markets. According to the data, the US economy added 263K jobs in March, against the expected 185K, thus increasing the likelihood that the Friday NFP will exceed the consensus. Gold and the Japanese Yen are sent to the end of the queue for investors’ attention, losing about 0.5% at the time of writing.


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