Daily Market Outlook, April 5, 2022

Overnight Headlines

Today’s economic data calendar is dominated by March services surveys. In the case of the Eurozone and the UK, the PMI services measures are second readings, although there will be new detail on some of the countries in the euro area. The first updates saw the UK headline measure rise to a nine-month high as the end to Covid restrictions provided a further boost to activity. Meanwhile inflationary pressures continued to build. In contrast, the Eurozone reading slipped to a two-month low, potentially indicating growing uncertainty resulting from the Ukrainian situation. However, its level was still consistent with decent overall growth in the sector.

The US ISM services survey for March is new data. The signs are that US services have also experienced a lift from the easing in Covid measures and that seems likely to be reflected in today’s survey. Consequently, expect the headline reading to rise to 58.0 from 56.5 in February. That would leave it below its levels in January and much of last year but it would still be historically consistent with rapid economic growth. The inflation gauges will be watched for ongoing signs of elevated pressures, particularly from what appears to be a very tight labour market.

Already released data for trade in goods suggest that the US international trade deficit fell only modestly from January’s all-time high. As the US does not rely on energy imports, its trade balance should be less impacted by recent price rises than the Eurozone or the UK. However, its relatively rapid rate of growth appears to be sucking in other sorts of imports.

Today’s list of central bank speakers is light. The only one currently is US Federal Reserve Governor Brainard. She has been nominated as the next Vice-Chair. Her new role has not yet been formally confirmed by the Senate but nevertheless any hints she drops of the likelihood of a 50-basis point rate hike at the Fed’s next meeting in May are likely to be seen as highly significant. She is talking at a forum on the unequal impact of higher inflation and can be expected to reassure that the Fed is committed to bringing inflation down.

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

EUR/USD: 1.1100-10 (1.4B)
USD/JPY: 122.00 (625M), 122.60 (400M). EUR/JPY: 133.50 (480M)
GBP/USD: 1.3335-40 (655M)
EUR/GBP: 0.8400 (530M), 0.8425 (340M), 0.8460 (790M)
USD/CAD: 1.2525 (575M), 1.2570-80 (915M)
AUD/USD: 0.7400 (400M), 0.7500 (1.2B)

EURUSD Bias: Bearish below 1.12 Bullish above

Consolidates after slide as focus back on Russia – Ukraine
EUR/USD opened -0.70% at 1.0970 after threat of more Russia sanctions weighed
In a very quiet Asian session it consolidated in a 1.0966/79 range
Heading into the afternoon it is unchanged around 1.0970
Resistance is at the 21-day MA at 1.1012 and break eases downward pressure
Support is at the 61.8 of 1.0806/1.1185 at 1.0950 and break targets 1.0806
EUR under pressure against commodity currencies due to focus back on Russia-Ukrain

GBPUSD Bias: Bearish below 1.3350 Bullish above.

USDJPY Bias: Bullish above 120 Bearish below

AUDUSD Bias: Bullish above .7300 Bearish below