With the chancellor’s key Budget measures pre-announced earlier in the week, they were already priced into the market. This stunted market reaction to Mr Sunak’s £65 billion spending splurge to support jobs, investment and the economic recovery – causing the pound to hold relatively steady against the dollar on Wednesday. Although the Budget was well received by investors, with the fiscal taps to be left open until the end of the year, the pound could not rally.
On Thursday, the pound managed to advance back towards the 1.40 benchmark, helped on its way by positive data and reports that coronavirus case rates are falling among all age groups in England. The IHS Markit/CIPS UK Construction Purchasing Managers’ Index rose above 50 – the threshold that represents expansion. The sector picked up more than expected last month, aided by a return to growth in the commercial sector as businesses reignited projects that had been delayed by the pandemic – a trend that has been supported by the successful vaccine roll-out.
By this morning, however, the pair had tumbled back to 1.38.
Fed to Maintain Easy-Money Policies
A mixed bag of data from the US preceded a highly anticipated speech from Federal Reserve Governor Jerome Powell yesterday.
The latest nonfarm productivity reading revealed US worker productivity fell at its sharpest pace in nearly 40 years in Q4. Weekly jobless claims rose less than expected last week, totalling 750,000, up from 736,000 the week before but below the 750,000 estimated. Factory orders rose 2.6% in January as manufacturers continued to spearhead the economic recovery.
Jerome Powell used an interview at The Wall Street Journal Jobs Summit – his last scheduled public event before the central bank’s next policy meeting on March 16-17 – to reaffirm his intention to keeping the Fed’s easy-money policies in place until the jobs market improves: “Today we’re still a long way from our goals of maximum employment and inflation averaging 2% over time,” Mr Powell said on Thursday.
A lack of notable data in the UK today means investors will be focused on releases from the US. The pick of the bunch is the latest Nonfarm Payrolls figure – the number of new jobs created during the previous month in all non-agricultural business. The US is expected to report an increase of 182,000 jobs in February, which would signal a slow recovery. Other data slated for release from the US includes: Goods and Services Trade Balance, Average Hourly Earnings, Labor Force Participation Rate, U6 Underemployment Rate, Unemployment Rate.
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