Euro And Pound Higher On Firm Data, US Dollar Expects FOMC Statement

Market Reviews

The British pound rose against the US dollar, recovering from 4-month lows, supported by favorable PMI data in the construction sector of Britain. UK construction PMI grew to 52.5 in April, from 47.0 and exceeded forecast of 50.5.

The euro also strengthened against the dollar after two days of noticeable decline, against the backdrop of GDP data, business activity in the manufacturing sector and the unemployment rate in the euro area, while investors are awaiting the outcome of the Fed meeting. Eurozone GDP growth slowed to 0.4% qoq in Q1. Unemployment rate was unchanged at 8.5% in March, staying at the lowest level since December 2008, meeting expectation. PMI manufacturing increased to 56.2 in April, from 56.0 in March.

US dollar is trading slightly lower ahead of FOMC rate decision and statement. Increasing interest rates last month by 25 bps to 1.50-1.75%, the Fed is likely to maintain monetary policy unchanged in accordance with the political stance of "gradual increase in rates." Nevertheless, the probability of a more stringent monetary policy remains strong, as the recent flow of economic data betrays confidence that the Fed will announce yet another three rate hikes this year.

Today’s US ADP report showed, that US private employers added 204.000 jobs in April, slightly higher than economists' expectations. Economists had expected the ADP nonfarm payrolls report to show a gain of 200.000 jobs. The ADP figures come ahead of the Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

Japan’s consumer confidence fell to 43.6 in April, from 44.3, below the forecast of 44.5. Monetary base increased by 7.8% yoy in April, below forecast of 9.2% yoy. The China Caixin PMI manufacturing grew to 52.5 in April, from 51.0 in March, and exceeded forecast of 50.9. New Zealand employment increased by 0.6% qoq in Q1, while unemployment rate fell to 4.4%.