US Non-Farms takes centre stage

6 May, 2016

Rob Bastin

Yesterday’s trading got under way with UK services data at 9:30am. Markets were hoping for a good figure to rescue the slowing growth figures that have been announced over the week and have pushed the pound back down from its recent highs. Last week UK GDP growth was slower than forecast at just 0.4% on the quarter compared to expectations of 0.6%. Tuesday confirmed that the manufacturing sector had in fact contracted for the first time in over 3 years, and then construction sector yesterday also missed expectations. Services is the UK’s largest sector and typically seen as the most important with regards to its growth performance. A growth figure of 52.3 was confirmed however again this was a bigger slow down than expected from last month’s figure of 53.7. With the pound still in a negative trading and the uncertainty of the EU referendum now just 7 weeks away, the slowdown in economic growth is likely to put added pressure on Sterling in the coming weeks.

GBP/EUR and GBP/USD have both dropped 3 cents in as many days since last week after trading at the best levels for 6 weeks. The pound is now in the next downward arm of this negative trend with no telling how low rates will go and how quickly, but the expectation is for a continued negative move assuming the EU referendum polls remain as close as they are. Yesterday’s trading however provided some small relief, particular against the Euro with a 1 cent recovery, providing a god opportunity to secure your currency at a higher level.

This afternoon is the big unemployment announcement for the USA, with Non-farm Payrolls announced at 1:30pm along with average earnings and the Unemployment Rate itself. The greenback has been on the back foot lately as the FED are delaying the next interest hike due to a slowdown in growth and poorer eco-stats than were forecast. The labour market is another important area of focus to decide whether another hike will be warranted in the coming months. Non-farms afternoon is typically one of the most volatile times of the month so speak to your broker early if you have an imminent requirement.