Market Review - Fundamental Perspective 06 April 2018

Global equities rebounded yesterday as concerns about a full-blown trade war eased. However, tensions escalated again after US President Trump asked his administration to consider further tariffs on Chinese imports which prompted a mixed response from Asian stocks and drove US and European equity futures lower overnight.
In FX, the USD gained against its G10 peers ahead of US nonfarm payrolls and Fed Chair Powell’s speech this afternoon. The tariff headlines overnight prompted USDJPY to dip by as much as 0.4% but the pair retraced its initial losses quickly.
PMI releases across the globe have come in below expectations and appear to have peaked, but remain at elevated levels. The euro area March final composite PMI was revised slightly downward from the flash estimate and fell to a 14-month low. In the UK, the effect of Brexit concerns seems to weigh on business sentiment sending services PMI to its lowest level since the EU referendum.
GBPUSD came under pressure yesterday, mainly driven by generally strong demand for USD but the weaker-than-expected UK PMI print also dragged the pair lower.
Our traders currently see GBPUSD support at 1.3965 ahead of 1.3880, and resistance at 1.4100. EURGBP continues to trade in a tight range, with support at 0.8710 ahead of 0.8665, and resistance at 0.8800.
In India, the RBI kept rates unchanged as expected but stroke a dovish tone in its statement. Barclays Research expects “… monetary policy to remain largely data dependent; given our outlook for a benign CPI inflation, we believe the MPC will stay on hold during 2018”.
Today’s focus is on the US March employment report and we forecast solid employment at 200k jobs gains, a decline of unemployment to 4.0% and a rise in average hourly earnings to 2.8% y/y.

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