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by Darius Anucauskas

Brexit is Still in BoE’s Way. US Jobs Report in Focus

The Bank of England kept their interest the same, at 0.75%, as was widely expected. The only concern for them remains the Brexit uncertainty, which is holding them back from further rate increases. But putting that aside, investors will focus today on the US jobs numbers for the month of April. In addition to that, the Eurozone will release its preliminary inflation numbers. The US will show the figures of their Services PMIs for the month of April after the NFP release.

The BoE Sounded Somewhat Positive, But Brexit Is Still an Issue For Them

Yesterday, the Bank of England Monetary Policy Committee, in a unanimous vote, decided to keep the interest rate at 0.75%. It wasn’t a huge surprise for the market, as this is what traders were expecting to see anyway. All 9 members of the Committee were in favour of staying with same Bank rate, at least for now. But, once again, the BoE made it clear that their willingness to aim for a gradual rate rise in the near future is still on the table. The only issues, which are stopping the Bank from raising rates soon, is the slowdown in global growth and, of course, Brexit.

The later one (Brexit), was one of the main problems that concerns Mark Carney and his team right now. The uncertainty surrounding the UK’s withdrawal from the EU is not helping the BoE to work on their policy. Let us remind the reader that, initially, UK was supposed to leave the EU on March 29th, but because the Parliament could not agree on May’s deal, the EU decided to give UK an extension with a deadline on October 31st. The Bank said that the Brexit issue caused business investment to fall, as companies focus on shorter-term plans. According to Carney, he believes that such company concerns are justifiable and they have the full right to remain short-sighted for now. Also, businesses in the UK think that the Brexit uncertainty won’t be sorted any time soon.

But on a more positive note, the BoE stated that, overall, the UK economy seems to be doing fine. The unemployment numbers are at their lows, real wages have increased, leading to greater consumer spending. As we understood from Mark Carney’s words, he is somewhat satisfied with the UK economy at the moment. But if it wouldn’t have been for Brexit, the rate-increase date could have been closer already. Now, the Bank will have to play the waiting game until it sees the light at the end of the tunnel of the Brexit saga.

Everyone Is Shifting Their Attention to US Jobs Numbers

Today we get the long-awaited US employment figures for the month of April. Last time in March, the NFP number came out at 196k, which had beaten the February figure and was higher almost 6 times. The initial forecast was at 175k. This time, analysts are seen to be placing bets slightly below the previous number. They expect the April number to be a bit on the lower side, closer to 181k. Nevertheless, it’s still not a bad one.

The unemployment rate in the US is currently sat at 3.8%, which is quite an achievement, given that for about 19 years, the figure was above that, apart from the three occasions last year. The August, September and October unemployment numbers came out at 3.7%. If we look at a historic period from the most recent release and take it back all the way to 1948, the lowest number of registered unemployed people in the US was spotted in May of 1953, and that number was at 2.5%.

Another important data set that investors will keep an eye on, will be the average hourly earnings, which will give us and indication if the amount that employees receive per hours has grown or not in the past month. At the moment, the forecast for the YoY figure sits at +3.3%, when the previous was only at +3.2%. The MoM number is expected to perform slightly better. The April number is forecasted to come out at +0.3%, which is better than the previous by two tenths of a percent. This is one of the data sets, which the US Fed likes to monitor closely when setting their policy on interest rates.

USD/JPY – Technical Outlook

Overall, USD/JPY is still trading above its medium-term upside support line taken from the low of January 3rd. But throughout this week, the pair moved in an undecisive manner, probably waiting to make the big move during the release of the US employment figures. For now, we will stay cautiously-bullish and wait for a confirmation break of one of our key resistance levels, before getting comfortable with the upside scenario.

A strong push above the 111.66 barrier, marked by yesterday’s high, could invite more buyers into the game, as the path towards the 111.90 hurdle may be cleared. If the buying activity remains strong, a further move higher might bring the rate to the 112.15 zone, which acted as a good resistance area on March 5th and around April 17th. The pair might stall there for a bit, or even retrace back down a bit. But if the bulls are still feeling strong and confident, they could take back control of USD/JPY and drive it above the 112.15 obstacle towards the 112.40 level, marked by the high of April 24th.

On the other hand, a break of the aforementioned upside line and a rate-drop below the 111.05 hurdle, could spook the bulls from the field in favour of the bears. Such a move might attract even more sellers, who could send USD/JPY even further down, potentially testing the 110.85 obstacle, a break of which could lead the rate to the 110.55 zone, marked by the low of March 29th.

USDJPY 4hour

AUD/CAD – Technical Outlook

After Monday’s failed attempt to push back above its short-term upside support line taken from the low of March 1st, AUD/CAD sold off once again and is now trading below a tentative downside line drawn from the high of April 18th. Even though we may see a small retracement back up again, as long as that downside line remains intact, we will target lower areas.

The pair found good support near the 0.9410 zone, from which the rate is now seen rebounding. As mentioned above, even if AUD/CAD travels back up again, if the bulls fail to push the pair above that downside resistance line, the bears might quickly take advantage of the higher rate and send AUD/CAD back down. The slide could bring the pair to the 0.9410 area again, a break of which may lead the rate towards the 0.9385 hurdle, marked by the low of March 14th.

Alternatively, if the aforementioned downside line fails to withstand the bull pressure, a break of it could open the door to some higher levels. But in order to get slightly more comfortable with the upside, a break above 0.9465 barrier would be required. This way AUD/CAD might make its way to the 0.9490 obstacle, which if broken could clear the path towards this week’s high, near the 0.9508 zone.

AUDCAD 4hour

As For The Rest Of Today’s News

As for the rest of Friday’s releases, during the European morning, we get Eurozone’s preliminary inflation data for April. The headline CPI rate is forecast to have risen to +1.6% yoy, while no forecast is currently available for the core rate, which slid to +0.8% yoy in March from +1.0% in February. The forecast for a rising headline rate is supported by the German forecast, but we prefer to pay more attention to the core inflation metric. Another print pointing to subdued underlying inflationary pressures in the Euro area, could add to speculation for more stimulus measures by the ECB and perhaps another delay in the timing of when interest rates could start rising, especially if Tuesday’s GDP data reveal another slowdown in the bloc’s economic activity.

In the US, the final Markit services and composite PMIs for April are coming out, alongside the ISM non-manufacturing index for the month. The Markit prints are just expected to confirm their preliminary estimates, while the ISM index is forecast to have risen to 57.0 from 56.1.

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