Fresh signs of US economic slowdown squeeze Dollar

Today's news headlines:

  • ‘Private sector hiring falls to 18-month low, and manufacturing sheds jobs, ADP says’. State of US economy pushed into focus again after employment numbers dip, with the effects of monetary stimulus and global trade uncertainty both taking a toll. (MarketWatch)
  • 'British Pound firms up after lawmakers vote to block no-deal Brexit’. Sterling gained a little after MPs finally agreed on demanding an extension by the narrowest of majorities. Although with the decision ultimately resting with EU leaders, upside for the Pound is likely to be limited. (Bloomberg)

US employment

Yesterday’s ADP Payroll survey from the US served as a reminder that the country’s economy isn’t exempt from the uncertain market conditions. The prospect of the Federal Reserve cutting interest rates in June has now edged up to 20% as a result of the slower growth in the labour market, while mounting concern over an economic slowdown by US CFOs is furthering concerns. Friday’s wage growth data will remain an important metric as solid expansion could make a Fed rate cut more difficult to execute. Policymakers need to avoid driving an inflationary bubble, but again, there’s scope to see the Greenback’s recent run of strength eroded.

Brexit

Politicians finally agreed on something in last night’s late-running session of Parliament. By a majority of one vote, they passed a bill requesting an extension of Article 50, something Theresa May had already committed to. This ultimate decision lies with other EU leaders, who will want to see a plan for how the UK will use any extra time before agreeing to a delay. Another series of indicative votes are scheduled for early next week, with the results set to define government intentions better. If these are unacceptable to the European Union, the prospect of a no-deal Brexit on April 12th will increase, and the Pound will likely come under pressure.

GBP/USD

The Pound moved fractionally higher against the US Dollar in the wake of last night’s vote result, and some further modest gains have been seen early in the European session. However, with a fair degree of uncertainty still in play, it seems that enthusiasm for Sterling remains limited.

EUR/USD

The Euro is trading in a very narrow range against the US Dollar following modest gains earlier in the week. Further disappointing data from the US could provide the impetus for the pair to move higher.

GBP/EUR

The Pound is essentially moving sideways against the Euro, although some support for Sterling is emerging early in the European session. As noted above, enthusiasm here will likely be limited until there’s more clarity as to whether the European Union will accept the UK’s application to extend Article 50.