Citi

A revival in risk sentiment on Monday, despite many markets being out for holidays, appears to have held in Asia. USD ISM services beating at 63.7 (59 expected), following a 916k NFP print (660k expected) last Friday appears to have triggered broad optimism, as well as USD weakness despite the surprise beats in both. Away from FX, US equities have continued to push higher with S&P making new all-time highs around 4077, deriving tailwinds from data here and reflation biases.

In Asia since, AUD’s RBA left policy tools unchanged, while CNH saw another services PMI beat (Caixin). Neither appear to have moved relevant markets though. Looking ahead to today, there is little on the calendar to derail recent trends too, with EUR unemployment and COP trade data the only points of note.

JPMorgan

GBP

Blockbuster US data and USD weakness has punctuated the long Easter weekend and while there is some head scratching out there those approaching the FX markets with a seasonal lens have been rewarded especially as US yields have failed to make any headway in response to the data. Indeed cable is off to a flyer in April so far living up to the hype of the plethora of conversations on sterling’s April performance over the last few weeks. Step 2 of lockdown lifting is confirmed for next week but would-be holiday goers were left with little from Boris yesterday other than further realization that trips will likely be kept onshore this summer which would actually be a further positive for the pound. We remain long sterling here albeit against the Euro given the gaping divergences and we remain encouraged by the time spent on the 0.84 handle after a glacial break of the 0.8530/50 zone. Besides some final PMI data there is little to look for this week in the UK while Fed speak will be in focus on the other side of the pond throughout the week - highlights are Minutes Wednesday and Powell Thursday. 1.3850/55 will act as short term support with 1.3810 below (0.8470/75, 0.8420/30 EURGBP) while next resistance is 1.3950/55 with 1.4000/10 above (0.8550, 0.8600/05 EURGBP).

EUR

Interesting holiday market price action in the euro, failure to break lower post month end dollar demand and very strong US data (ISM and Payrolls) led to some short covering as we regained the 1.18 handle. It seems US yields failing to break materially higher despite robust growth is encouraging some USD bears back out as we enter April in a positive mood for markets. As alluded to last week, first resistance was taken out above 1.1770 and some short term position squaring ensued. Going forward, euro bears remain somewhat in control whilst we stay below the 200 day moving average which now comes in just below 1.1890. Whilst the US data keeps printing in a strong fashion it’s hard to go against the USD for more than a very short term trade at this point, but I am watching signs for more positive news out of Europe in the weeks ahead to position for a sharp but delayed European growth catch up. For now support levels come in towards 1.1770 and then last week’s lows around 1.1700, 1.1630/40 would be a decent target/reassessment for the remaining bears. Above, 1.1840/60 should provide resistance and then the aforementioned 200 day 1.1890.

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