American FX Outlook: Permanent US Trade Deficit Is The Core Of Trade Wars

What you need to know before markets open

• The manufacturing and services activity decelerated sharply from cyclical multi-year high at the turn of this year in March, but activity still remains solid in historical terms and consistent with 0.6 percent GDP rise in Q1 2018. For details read my analysis here.
• The economic activity slowdown in the UK is particularly pronounced with construction PMI falling into contraction territory and services PMI decelerating to the lowest level since Brexit referendum. 
• The trade tariffs ping-pong was not enough to trigger massive equity markets sell-off on Wednesday with the most likely scenario of the US and China might prefer a diplomatic solution to the current issue of trade tariffs over unilateral decision of each party.
• The initial jobless claims headline the day ahead of the US Non-Farm Payroll report tomorrow. 

Thursday’s market moving events

• The US trade balance is seen rising to -$56.8 billion in February.
• The US initial jobless claims are seen reaching 225K in the week ending March 30 after reaching a 4-decade low of 215 K.
• Canadian trade balance is seen reaching a deficit of -C$2.0 billion in February.
• SNB Governing Board member Andrea Maechler is scheduled to deliver a speech titled "Today and tomorrow: a look into the digital future" at a Money Market Event hosted by the SNB, in Zurich at 16:00 GMT.
• Federal Reserve Bank of Atlanta President Raphael Bostic is due to speak about financial literacy at the University of South Florida, in Sarasota at 15:00 GMT.

Major market movers

• The unexpectedly strong slowdown in services activity in the UK saw GBP falling to 1.4030 before recovering to mid 1.4000s.
• Antipodean currencies AUD and NZD were the main beneficiaries of the escalation of trade-related tensions that eased on Thursday sending both antipodeans down 0.5 percent on the day.
• With trade tensions easing the US Dollar gains traction ahead of the key Non-Farm Payroll report due this Friday.

Earlier in Asia/Europe

• Australian trade balance reached a surplus of  A$825 million in February, down from A$1.06 billion in the previous month.
• German factory orders rose 0.3 percent m/m in February coming out less than forecast.
• German final services PMI fell to 53.9 in March with composite PMI taking into account services and manufacturing falling to 55.4 in March.
• The Eurozone final services PMI fell to 55.2 in March compared to 57.1 in February, as both manufacturing and services sectors are cooling off from the cyclical high, but activity still remains robust.
• The UK services PMI fell to the lowest level in 20-months of 51.7 in March missing the forecast of 54.0 reading.
• The Eurozone retail sales rose less than expected by 0.1 percent m/m in February while increasing 1.8 percent y/y.
• The Eurozone PPI rose 0.1 percent m/m in February rising 1.6 percent y/y.