Although US jobs data was slightly better than expected, fears over the US and global outlook increased.

Although US jobs data was slightly better than expected, fears over the US and global outlook increased after a further tough warning from the US Administration.

US and global equities moved significantly lower amid global recession trends before a tentative rally on Thursday. USD/JPY dipped to 2-week lows at 107.00 amid the risk-off environment, but EUR/USD dipped to near 1.0900 on a fresh round of dollar demand before a recovery to 1.0960.

Sterling was resilient despite the dip in risk appetite with some support on valuation grounds with GBP/EUR near 3-week highs.

The final Euro-zone PMI manufacturing index was revised down to 44.5 from the flash reading of 44.8. The Italian and Irish indices both declined to the lowest level for over 10 years while overall business confidence slid to a record low. The EU Commission did, however, introduce a short-time working scheme to help protect jobs.

Euro-zone coronavirus developments remained generally negative with Italy confirming that the current lockdown would be extended until April 13th. Spain also recorded a further 864 deaths in the latest 24-hour period, the largest figure so far, although the rate of increase appears to be levelling out.

The March ADP employment report recorded a decline in private payrolls of 27,000 for March after a revised 179,000 increase for the previous month. Although this was much smaller than the expected decline of around 150,000 with the survey conducted in mid-March before most lockdowns took effect, this was still the first decline in jobs since September 2017. The latest jobless claims data is due on Thursday and monthly jobs report on Friday.

The March ISM manufacturing business confidence index declined to 49.1 from 50.1, although this was above consensus forecasts of 45.0.  The new orders index declined sharply to a 10-year low of 42.2 from 49.8 while employment declined at a faster pace. Order backlogs declined and prices fell at a faster pace on the month. There was, however, further deterioration in supplier deliveries due to on-going disruptions to supply chains and this will have inflated the overall index.

Despite fears over a steep US downturn, the Euro was unable to make any headway following the data with EUR/USD retreating to near 1.0900 as the dollar attracted renewed defensive demand amid cash demands. The US currency edged lower on Thursday with the Euro near 1.0950.

The dollar was unable to make any headway ahead of the New York open as underlying risk appetite remained fragile. There were further concerns over the US outlook following president Trump’s downbeat assessment of the short-term outlook.

Treasuries made further gains following the US data releases and equity markets remained in negative territory which kept the dollar on the defensive with a USD/JPY retreat to near 107.00. Wall Street equities lost further ground into the close as Vice President Pence warned that the US faced an Italian-style situation with the coronavirus and the number of cases moved above 200,000.

The Federal Reserve announced that it was relaxing capital requirements for big banks in an attempt to underpin lending. US equity futures made tentative gains in Asia on Thursday, but underlying sentiment remained fragile after another stark warning from President Trump over the US outlook.

March data recorded a drop in US car sale of over 30%, reinforcing the sharp near-term slide in demand. USD/JPY was able to make only a tentative recovery to the 107.30 area as tensions remained high.

The final UK manufacturing PMI index was revised down to 47.8 from the flash reading of 48.0, although this was above consensus expectations. New orders declined to a 7-month low and overall business confidence declined to a record low. The services sector data due for release on Wednesday will inevitably register sharper deterioration with the economy heading for a very sharp contraction. The latest data also registered close to 1.0mn new welfare benefit claims in the last two weeks.

Risk appetite was fragile during Wednesday with further losses in European equity markets, but Sterling was resilient during the day.

The UK also reported a sharp increase in coronavirus deaths, although this was expected given the lag between taking action to restrict movement and seeing an impact in statistics on the number of cases and deaths. GBP/USD held close to 1.2400 before fading after the European close. Sterling edged higher on Thursday with GBP/USD trading above 1.2400.

Economic Calendar

07:00GBP Nationwide House Prices (M/M)(MAR)-0.10%0.30%
07:00GBP Nationwide House Prices (Y/Y)(MAR)2.00%2.30%
07:30CHF CPI (M/M)(MAR)0.10%0.10%
07:30CHF CPI (Y/Y)(MAR)-0.50%-0.10%
09:30GBP PMI Construction(MAR)-52.6
10:00EUR German PPI (M/M)(MAR)-0.60%-0.50%
10:00EUR German PPI (Y/Y)(MAR)-0.60%-0.50%
13:30USD Continuing Jobless Claims-1.803K
13:30USD Initial Jobless Claims3.000K3.283K
13:30USD Trade Balance(FEB)-43.00B-45.30B
13:30CAD Trade Balance(FEB)-0.83B-1.47B
15:00USD Factory Orders(FEB)0.20%-0.50%
23:30AiG Construction Index(MAR)-42.7

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.