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Softer start expected for Europe

European and US equity markets traded higher on Friday after the US announced a by-and-large positive jobs report on Friday. 

196,000 jobs were added in March, and that easily topped the 180,000 forecast, and the February report was revised up 13,000 to 33,000. The unemployment rate remained at 3.8%, in line with forecasts. The yearly average earnings report came in at 3.2%, while economists were expecting it to remain steady at 3.4%. The Fed’s preferred measure of inflation is the core PCE rate, and that is 1.8%, so even though wage growth cooled, US workers have a comfortable real wage increase.

The US dollar edged up on Friday even though the US jobs data wasn’t overly impressive. The weakness in other currencies ensured that the US dollar performed well. The broadly negative updates from the eurozone in recent weeks has put pressure on the single currency, and that pressure is likely to remain given the European Central Bank (ECB) will hold their next meeting on Wednesday. The ECB announced plans to launch a new targeted liquidity scheme in September, but given that the eurozone already has a debt problem, there might not be many takers for new loans. 

Stocks in Asia were mixed overnight even though it was announced via Chinese state TV that ‘new progress’ was made in the trade talks with the US last week.

Sterling finished last week on a negative note as the continued lack of clarity weighed on the pound. Theresa May would like an extension until 30 June, but Brussels aren’t keen to grant a short delay, and the EU is more comfortable with a year-long ‘flexible’ extension. The UK is set to leave the EU without a deal in 12 April unless something is agreed up between now and then. Theresa May will continue to hold talks with the Labour Party in a bid to secure cross-party support, meanwhile the EU are set to hold an emergency summit on Wednesday, and we should get an answer in relation to the extension by then.

Canada also revealed their jobs report on Friday. The unemployment rate held steady at 5.8%. The employment change was -7,200, but keep in mind it was the first decline since August, and wage rate ticked up to 2.3% - highest rate since August.  

Oil was driven higher on Friday by the update from OPEC. The oil producing group have been on a mission to curtail output in order to push up the price. The organisation confirmed that output dropped by 570,000 barrels per day to 30.23 million barrels per day in March, the lowest in more than four years.

The German trade balance will be announced at 7am (UK time) and the consensus estimate is for a surplus of €19 billion, and would be an improvement on the €18.5 billion surplus in January.

The sentix investor confidence report will be revealed at 9.30am (UK time), and traders are expecting a reading of -1.7m, which would be an improvement from -2.2 in March. The report has been in negative territory for four months.

US factory orders will be announced at 3pm (UK time), and economists are expecting a decline of 0.6%, and that compares with a 0.1% increase in January.

EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1176 area. Resistance might be found at 1.1448.  

GBP/USD – has been driving higher since early December, and if it holds above the 200-day moving average at 1.2981, it might retest the 1.3380 area. The 1.2775 area region might act as support.

EUR/GBP – while its holds below the 200-day moving average at 0.8840, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.  

USD/JPY – has been largely been pushing higher throughout 2019, and if it continues it might target the 112.00 area. 109.55 might act as support.

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