April 04, 2023

Daily Report 04/04/2023

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The final UK PMI manufacturing index was revised marginally lower to 47.9 from the flash reading of 48.0.  Overall domestic influences remained limited during the day with markets focussing on global developments.  Sterling managed to find support against the dollar in early Europe on Monday and gradually regained ground as the US currency was subjected to fresh selling pressure. There were also doubts that the Bank of England would be able to relax on monetary policy. As equities made headway, there were gains to highs against the dollar before a retreat later in the day. Sterling held a firm tone on Tuesday with the currency underpinned by expectations of gains on seasonal grounds during April.

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The Euro was able to find support in early Europe on Monday and quickly moved back higher. The final Euro-Zone PMI manufacturing index was revised slightly higher to 47.3 from the flash reading of 47.1 and had little impact with the Euro continuing to recover. Overall, there were expectations that the ECB would adopt a more restrictive policy that the Federal Reserve which helped underpin the Euro. In this context, the single currency posted strong gains to highs before a retreat.

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The US ISM manufacturing index declined to 46.3 for March from 47.7 previously which was below expectations of 47.5 and the fifth successive reading in contraction territory below the 50.0 level. New orders contracted at a faster pace on the month. Production also remained in contraction for the month while supply pressures continued to ease. Employment continued to decline on the month and at a faster pace than for the previous month. As far as inflation is concern, there was a fresh decline in the prices index to 49.2 from 51.3 in February. There were still major uncertainties over Federal Reserve policy with inflation and employment trends crucial. During the day, there was a slight shift in expectations with the chances of a 25 basis-point rate hike for March seen at around 55%.

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