Overall confidence in the UK economic outlook remained fragile as media focus on the surge in energy prices remained intense. The PMI manufacturing business confidence index was revised down to a 13-month low of 55.2 for the final March reading from the flash figure of 55.5. There was a decline in export orders for the sixth time in seven months, reinforcing underlying concerns over the outlook. Cost pressures remained strong and average selling prices rose at the quickest pace in three months and overall business sentiment dipped to a 14-month low amid concerns over the outlook. Sterling remained fragile and dipped lower after the US jobs data but found support against the US currency. CFTC data recorded a further increase in Sterling short positions to just over 40,000 contracts in the latest week and the largest short position since the beginning of January. The short positioning will maintain the scope for short covering if there is a shift in sentiment, but sentiment remains brittle.
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10.05 Andrew Bailey Speech
The headline Euro-zone CPI inflation rate surged to a fresh record high of 7.5% for March from 5.9% the previous month and well above consensus forecasts of 6.6%. The core inflation rate increased to 3.0% from 2.7% and slightly below market expectations of 3.1%. The Euro was unable to gain significant support from the data.
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US non-farm payrolls increased 431,000 for March which was below consensus forecasts of 490,000 for the month, but the February increase was revised higher to 750,000 from the first estimate of 678,000. Manufacturing jobs increased 38,000 on the month while the increase in government jobs was held to 5,000. The unemployment rate declined to 3.6% from 3.8%, slightly below consensus forecasts and the lowest rate since February 2020. The household survey also recorded a small increase in the participation rate and an increase in the number of people employed of over 730,000. Average hourly earnings increased 0.4% on the month with the year-on-year increase at 5.6% from 5.2% and the highest rate since May 2020, which tended to increase concerns over higher underlying earnings growth. Reaction was relatively subdued with the dollar unable to hold initial gains as strong data was priced in. Chicago Fed President Evans stated that it would not be a big risk if the rate-hike path includes some 50 basis-point increases. He added that raising rates to just below 2.5% by March 2023 would give the Fed optionality. San Francisco Fed President Daly stated that the case for a 50 basis-point in May has grown given labour-market and inflation developments. New York head Williams added that the balance-sheet run-off could start next month.
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