Market Drivers – US Session – 1 April

GBP/USD fell during US trade on Friday, as the US dollar strengthened versus the majority of its G10 counterparts. following strong US economic data.

The US dollar benefitted from a surge in US yields, particularly at the short-end of the curve. The bond market moves reflected a market interpreting Friday’s data strengthening the likelihood that the Fed opts to lift interest rates in 50 bps intervals in the coming quarters, and as more Fed policymakers indicated their openness to these larger rate moves.

Economic Data
The US economic docket featured March’s Nonfarm Payrolls report. Strong official March labour market report and robust but also highly inflationary March ISM Manufacturing PMI survey release added to the USD’s Strength on Friday.

The US economy added 432K jobs, the unemployment rate dropped to 3.6% and wages grew at a pace of 5.6% YoY in March, while the headline ISM Manufacturing PMI index remained well in expansion territory, but the Price Paid subindex spiked to its highest levels since last July.

Baker Hughes on Friday reported that the number of active US rigs drilling for oil was up by two to 533 this week. That followed a climb of seven oil rigs the week before, Baker Hughes data show.
Other Developments
As of this Friday (1 April), households in the UK will be paying over 50% more on their energy bills and this cost of living crisis is worrying the BoE. Indeed, Governor Andrew Bailey on Friday said that the BoE had already seen evidence of an economic slowdown that they expect to weigh on domestically generated inflation moving forward. That comes after the BoE softened its tone at its last meeting on the need for further rate hikes in the coming quarters to tackle inflation.

The Fed is likely to become more hawkish, the BoE is getting more dovish. That suggests GBP/USD may continue having a tough time in getting above its 21DMA and bears will be eyeing downside targets. The main ones to look at are this week’s earlier lows in the 1.3050 area and March lows at pretty much bang on the psychologically important 1.3000 level just below it.

The Russia-Ukraine tussles, elevated global inflation, and rising US Treasury yields, keeping the non-yielding metal pressured. An inversion in the 2s-10s yield curve is worth noting as investors assess the outcome for the yellow metal. At press time, XAU/USD is trading at $1924.46 a troy ounce.

Upbeat market sentiment and positive US economic data weighed on gold. US equities fluctuate as Wall Street is about to close; meanwhile, European bourses finished positive. The Russia-Ukraine war extends as peace talks over the last couple of weeks have failed to offer a diplomatic exit to the war.