ACT: Mid-Day Report: Dollar Mixed after Non-Farm Payroll
Dollar is mixed in early US session after job data. Non-farm payroll report showed 215k growth in employment market in March, slightly above expectation of 208k. Prior month's figure was also revised up from 242k to 245k. However, unemployment rate unexpectedly rose 0.1% to 5.0%. Average hourly earnings grew 0.3% mom, in line with consensus. Overall, today's data does nothing to change Fed chair Janet Yellen's view that rate path would be "gradual". Dollar recovers against commodity currencies and Sterling today but stays soft against Euro, Swiss Franc and Yen.
UK PMI manufacturing edged higher to 51 in March, up from the 34-month lower of 50.8 in February, but missed expectation of 51.3. Markit noted that "industry is still hovering close to the stagnation mark and will struggle to make a meaningful contribution to the next set of GDP growth figures." And, "although the drop in sterling may add some bounce to export performance in coming months, the exchange rate is likely to cause as many issues on the cost side through higher import prices as it aids for demand." Eurozone PMI manufacturing was revised higher to 51.6 in March. Swiss SVME PMI rose to 53.2 in March while retail sales dropped -0.2% yoy in February.
The Japanese Tankan large manufacturers index dropped to 6 in Q1, down from 12, below consensus of 8. Large manufacturing outlook dropped to 3, down from 7, below consensus of 6. Non-manufacturing index dropped to 22, down from 25, below consensus of 24. Non-manufacturing outlook dropped to 17, below consensus of 21. Large all industry capex dropped -0.9% versus expectation of -0.7%. They are talks that the across the board weak Tankan readings would pressure BoJ to take further actions in the upcoming meeting on April 28. Also, there are speculations that BoJ would lower inflation forecast for the coming two fiscal years at a quarterly review. For fiscal 2016, inflation could be projected to be 0.5%, down from January's projection of 0.8%. For fiscal 2017, inflation could be projected to be 1.5%, down from January's projection of 1.8%.
China official manufacturing PMI rose to 50.2 in March, better than expectation of 49.3 and back above 50. Non-manufacturing PMI rose to 53.8. Caixin China manufacturing PMI rose to 49.7 versus expectation of 48.3. The set of data argues that slowdown in China might be starting to bottom out. And there could be additional fiscal and monetary stimulus from the government and PBoC to boost growth. Caixin also cautioned that "considering that current conditions remain uncertain, the government needs to continue with moderate stimulus measures to reinforce market confidence".
GBP/USD drops sharply after failing to take out 1.4514 resistance but stays in familiar range. Intraday bias remains neutral for the moment. On the upside, break of 1.4514 will extend the rise from 1.3835. But in that case, we'd expect strong resistance below 1.4667 to limit upside and bring reversal. On the downside, break of 1.4052 will confirm that the corrective rebound from 1.3835 has completed and target a test on this low. Break there will extend the larger down trend.
In the bigger picture, the fall from 1.7190 is viewed as resuming the long term down trend from 2.1161 (2007 high). Further decline should be seen back to 1.3503 (2008 low). We'd start to look for reversal signal below there. In any case, break of 1.4667 resistance is needed to be the first sign of medium term bottoming.
