Daily digest market movers: Pound Sterling falls while US Dollar stabilizes ahead of labor data
- The Pound Sterling extends its correction to 1.2620 on cautious market sentiment. Deepening Middle East tensions and uncertainty ahead of the release of the United States NFP report for March promoted recovery in the US Dollar.
- The US Dollar Index (DXY) bounces back from a two-week low of 103.90. The killing of seven members of Iran’s Islamic Revolutionary Guard Corps (IRGC) by air strikes from Israeli forces in Damascus has deepened fears of Iran’s direct involvement in the Israel-Palestine war.
- Going forward, the next move in the US Dollar will be guided by the US NFP report, which will be published at 12:30 GMT. US employers are expected to have recruited 200K workers, lower than the former reading of 275K. The Unemployment Rate is estimated to remain steady at 3.9%. Investors will keenly focus on the Average Hourly Earnings data, which will provide a fresh inflation outlook. Annually, wage growth is expected to have softened to 4.1% from 4.3% in February.
- Strong labor demand and higher wage growth could allow the Federal Reserve to delay rate cut plans, while signs of labor market conditions easing will boost rate cut hopes for the June meeting.
- The Pound Sterling falls as investors hope that the Bank of England will pivot to rate cuts in June due to easing price pressures. Expectations for the BoE to reduce rates from June were reinforced after BoE Governor Andrew Baily said that market expectations for two or three rate cuts this year are reasonable.
- Meanwhile, the United Kingdom’s soft Services PMI data for March, released on Thursday, has impacted the economic outlook. The Services PMI fell to 53.1, missing expectations and the prior reading of 53.4. Tim Moore, Economics Director at S&P Global Market Intelligence, said: "The recovery in service sector output lost a little bit of momentum during March, and more so than suggested by the flash PMI results, but the overall picture remains reasonably positive.”
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