Towards a stronger USD?
The US dollar traded higher against all major currencies yesterday, partly due to the larger than expected rise in US services sector: the ISM (Institute for Supply Management) stated yesterday that, in February, its non-manufacturing index climbed to 59.7, up from 56.7 in January and better than economists’ forecast of 57.3 (a reading above 50 indicates expansion). The survey showed that companies remain mostly optimistic about business conditions and the US economy overall but some are concerned about the “uncertainty of tariffs, capacity constraints and employment resources.” This week in the US, it’s all about jobs: the monthly ADP survey of private sector job creation will be released, along with the Federal Reserve’s Beige Book, and will be closely scrutinised before Friday’s NFP (Non-Farm Payroll) report. If the ADP report shows that the private sector employment increased last month by more than 175K, the dollar could hold onto its gains but if it shows a job growth of less than 150K or if on Friday the NFP figures rise less than 150K, the greenback could weaken again.
In Australia, the latest GDP figures, released last night, showed that the economy expanded only by 0.2 per cent in the final three months of 2018, which is much slower than the 0.6 per cent that economists anticipated. The third-quarter had already disappointed with a 0.3 per cent growth, widely missing market forecasts of 0.6 per cent. The drop created further concerns for the global economy as it reflects China’s slowdown, the two countries having close trading links.
In the UK, talks in Brussels aimed at reaching a Brexit compromise didn’t produce anything and one EU official even said that they didn’t go well. Prime Minister May has still no majority in Parliament and the deal is likely to be defeated on the 12th of March. The pound remains stable, despite fresh announcement from the OECD this morning that growth in 2019 is likely to be the weakest since the financial crisis in case of a no-deal Brexit.
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