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China-US trade talks improve, US jobs report in focus

Stock markets in Europe largely sold-off yesterday as traders booked profits after the strong week of gains. 

A robust performance from the auto sector in Germany ensured the DAX reached another six month high. There wasn’t much in the way of macroeconomic news from Europe yesterday, and dealers decided to lock-in some profit ahead of the meeting between Trump and China’s Liu.

US equity markets largely finished higher last night, with the Dow Jones and S&P 500 posted gains while the NASDAQ 100 ended the session fractionally in the red. The S&P 500 registered its first six day winning streak in over one year. President Trump confirmed that progress is being made in the US-China trade talks and that an ‘epic’ deal could be announced in the next four to six weeks.  China’s vice premier, Lui He, said a news consensus was made in relation to trade discussions. Stocks in Asia are mixed on the back of the trade negotiations.

Theresa May will hold another round of talks with the Labour Party in an effort to break the Brexit deadlock. A number of Labour MPs have urged their leader, Jeremy Corbyn, to strike an agreement, and avoid a second referendum, while other Labour lawmakers warned that it is a trap, and that Mrs May want to include Corbyn in order to spread the blame.  

Italy is tipped to slash its GDP forecast to 0.1% from 1% for 2019, and it predicts the budget deficit will rise to 2.4%. Italy is already in a recession, and it looks as if things will go from bad to worse. The FTSEMIB edged lower yesterday, after it reached its highest level since August 2018 on Wednesday. 

Gold came under pressure yesterday on account of the firmer US dollar. The metal’s inverse relationship with the US dollar continues, and even though the Federal Reserve are likely to sit on their hands in the near-term, the US dollar might remain relatively strong.  

Yesterday Germany posted dreadful industrial orders numbers. In February, the reading fell by 4.2%, which was nowhere near the 0.3% increase that economists were expecting. The January report was revised from -2.6% to -2.1%. The announcement chimes in with the dismal manufacturing PMI report that was announced earlier in the week. German industrial output will be released at 7am (UK time) and the consensus estimate is 0.5%, which would be an improvement on the -0.8% recorded in January.

The Halifax house price report will be announced at 8.30am (UK time) and on a monthly basis, traders are expecting a drop of 2.4%, which would be a drop from the 5.9% growth achieved in February. The three month average yearly reading is tipped to be 2.3%, and keep in mind the previous reading was 2.8%.

US non-farm payrolls will be announced at 1.30pm (UK time), and the consensus estimate is 170,000, and would be respectable figure, and it would be a huge improvement on the 20,000 posted in February. The pitiful number in the last report, might be a sign of weakness in the US economy, or it might be an indication the US labour market is tightening, and employers should offer higher wages in order to fill vacancies. The unemployment rate is expected to hold steady at 3.8%. The annual average earnings rate is tipped to remain at 3.4%, and on a monthly basis, it is expected to be 0.3%, which would be a fall from 0.4% in February. The earnings component of the report has become more important lately as US workers who earn more, are more likely to spend more. Also, a high earnings number could be construed that the labour market is tight, and that employers need to offer higher wages in order to attract staff.

Earlier this week, the ADP employment report showed that 129,000 jobs were added in March, which undershot the 170,000 forecast, and the jobless claims announcement dropped to 202,000 – its lowest reading since mid-January.  

Canada will also reveal its jobs data at 1.30pm (UK time), and the unemployment rate is forecast to stay at 5.8%, and the employment rate is tipped to increase by 1,000, which would be a big drop off from the 55,900 jobs that were added in February. The devil is in the detail, and traders will be keeping an eye on the full-time and part-time job components of the report.  

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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