May 05, 2023

Daily Report 05/05/2023

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The UK PMI services-sector index was revised higher to 55.9 from the flash reading of 54.9. Overall business optimism strengthened to the highest level since March 2022 while there was strong upward pressure on costs with a particular focus on stronger wages growth. UK mortgage approvals increased to 52,000 for March from a revised 44,000 the previous month, although there was only a marginal increase in overall mortgage lending. There was a faster rate of increase in consumer credit growth for the month.

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The Euro-Zone PMI services-sector index was revised down to 56.2 for April from the flash reading of 56.6 despite an upward revision for Germany. The ECB increased interest rates by 25 basis points at the latest council meeting which was in line with consensus forecasts. There was, however, a shift in guidance with no formal commitment in the statement that there would be further rate hikes. The bank is determined to bring inflation down and dependent on the data releases.

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As the US non-farm payrolls (NFP) data for April approaches, economists at leading financial institutions expect a slowdown in the US NFP growth for April, with figures ranging from 170k to 175k, and the unemployment rate remaining at 3.5%. The implications for the US Dollar exchange rates vary, with some suggesting the currency could struggle, particularly against safe-haven G10 currencies, while others argue that any above-consensus data could send the USD higher. The consensus view seems to be that the April NFP data will not provide overwhelming support for the Fed to pause its rate-hiking cycle in June, but it may be sufficient to encourage a cautious stance. As the US economy faces tighter credit conditions and a potential slowdown in 2023, the US Dollar’s performance will be closely watched by analysts and investors alike.

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13:30  USD Nonfarm Payrolls (Apr)                                                Previous 179k    Forecast 236k