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A year after the market cratered in the Covid-19 crash, the global outlook is set to turn optimistic.
Week starting 06-04-2021
- The United States saw Q2 activity rise closer to pre-pandemic levels, as leading indicators began to show strong signs of economic recovery.
- While weekly jobless claims rose to 719,000, Non-farm Payrolls on Friday indicated that The US added a total of 916,000 new jobs in March 2021.
- This month’s Non-Farm Friday smashed expectations after Morgan Stanley and Goldman Sachs published estimates between 600,000 and 650,000. The largest gain was in the leisure and hospitality (280,000) sector, followed by private education (190,000). The US unemployment rate fell to 6%.
- The strong employment data highlights how the stimulus has helped boost the economy and influence potential future Gross Domestic Product (GDP). Nevertheless, the US is still 8.4 million jobs below the highs of February 2020. The Federal Reserve reiterated that it would take some time to reach full employment and will need to provide continued monetary aid to the economy.
- Combined with the easing of business restrictions and further progress in the vaccine rollout, market optimism has helped to boost risk-on sentiment and support strong performance in the equity markets. The Dow Jones advanced marginally during the week, while the S&P 500 advanced by 1.14% and touched 4,000 for the first time.
HKD, SGD and AED
- Last week, our selected Asian-market currency pairs lost some ground against a dominant Dollar and strong sterling.
- GBP/SGD and GBP/HKD pairs both appreciated throughout the week, by 0.37% and 0.43% respectively, while USD/SGD and USD/HKD remained relatively flat.
- With very little local data to move the exotic currency pairs, the Hong Kong Dollar and Sudanese Pound will rely on global influences in order to make gains in the upcoming week. GBP/AED also trended upwards during the week, appreciating by 0.33% and closing the week around 5.080.
- In the Eurozone, a battle to deal with the third wave of Coronavirus continues to put pressure on the Euro, which ended another week in the red. While France announced a brand new one-month lockdown, concerns over newly emerging Covid-19 variants further stunted the outlook on the Eurozone.
- Retail Sales also slumped by 5.9% in March, after February’s rebound. February’s Unemployment rate for the Euro Area is also due this week and is expected to remain at 8.1%.
- EUR/GBP closed around 0.85, dipping by 0.58% after opening at 0.855 on Monday. The EUR/USD pair fell to 1.170, after opening the week around 1.18, and closed at 1.762.
- Sterling had another respectable week in the markets, benefitting from prospects of a significant uptick in Q2 economic activity, as the UK is expected to outperform the majority of the G7.
- In the UK, over 30 million people have had their first dose of the vaccine and 3 million have had the second one. All of the region’s most vulnerable people have been offered the jab and the take-up has been better than expected. Lockdown restrictions are being eased slightly, with gatherings of up to six people now being allowed. Non-essential shops and hospitality sector business will be allowed to re-open on 12 April.
- Next week, the UK trade balance (February) will be released, after the trade deficit fell to £1.6 billion in January on the back of declining exports and imports. Industrial Production, Manufacturing Production and Construction Output for February will all be released too.
- Last week, the Rand benefitted from a combination of favourable local data and an overall risk-taking appetite. Both the GBP/ZAR and USD/ZAR pairs depreciated during the week, by 1.73% and 2.17%, respectively.
- South Africa’s trade surplus rose to R28.96 billion in February 2021, exceeding expectations and bolstering the Rand. Exports grew by 16.5%, mainly due to a 73% rise in the sales of vehicles and transport equipment. Meanwhile, imports only rose by 1.6%, leading to the widening surplus.
- The ABSA Manufacturing Purchasing Managers’ Index (PMI) rose from 53 last month to 57.4 in March, exceeding an expected rise to 55. Growth in vehicle sales of over 30% also reinforced the narrative of economic recovery and an uptick in spending. The Johannesburg Stock Exchange (JSE) rallied last week, with the prospects of higher potential GDP contributing to the bullish outlook.
- Apart from positive local data, the Rand was further supported by global market optimism over the prospects of an economic bounce-back. Next week, Retail sales for February will be released, after a previous year-on-year contraction of 3.5% in January.
- The Aussie dollar was unable to capitalise on the risk-taking mood, as the new lockdown in Brisbane halted any gains for the AUD pairs. GBP/AUD traded with a topside tilt, along with USD/AUD which also saw movement to the upside.
- This week, National Australia Bank (NAB) Business Confidence will be released for March and is expected to rise from 16 to 18. Westpac Consumer Confidence for the region is also anticipated to see a slight rise. We will also hear more about the region’s employment status, after February’s unemployment rate came in at 6.2%.
- The Kiwi Dollar reclaimed some strength against developed market currencies, after a string of poor performances in the markets. With little local data to influence the currency pairs, the NZD was driven by the positive global sentiment. GBP/NZD and USD/NZD pairs both fell slightly, along with a 0.93% depreciation in AUD/NZD.
- This week, the Reserve Bank of New Zealand (RBNZ) will be providing its interest rate decision, which is expected to remain at 0.25% until medium-term employment targets are met. New Zealand Manufacturing PMI is expected to increase slightly in March, after February’s decline to 53.4.
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