esterday’s business activity index slipped to 51.7, well below consensus and its lowest level since the immediate aftermath of the EU referendum. Poor weather conditions brought about by the ‘Beast from the East’ was cited, leading to weaker consumer demand. This, combined with a shockingly poor construction PMI on Wednesday that showed the sector contracted in March for the first time since September 2017, suggests that the UK economy could slow to just 0.3% YoY in the first three months of the year.

While we don’t think this will derail the Bank of England’s expected interest rate hike next month, it could cause doubt among some of the more dovish members on the committee on the need for higher rates.

The US Dollar was actually broadly stronger yesterday, with fears over a global trade war easing. Investors took the view that Washington and Beijing would come to a trade agreement following the announcement of the imposition of a number of tariffs by both countries. The White House’s economic advisor Larry Kudlow claimed on Thursday that he expected trade differences to be resolved, with barriers to likely ‘come down on both sides’.

US Dollar traders await nonfarm payrolls report

Economic news out of the Eurozone was soft again yesterday, compounding losses for the common currency and causing it to end the session almost half a percent lower versus the greenback. The latest retail sales data was particularly disappointing. Sales grew by just 0.1% in February and by an underwhelming 1.8% on a year previous versus the 2.1% consensus.

In the absence of any political developments, the major currencies will be driven almost entirely by this afternoon’s US labour market report, including the all-important nonfarm payrolls number. Economists have penciled in a reading around the 190,000 mark, with anything north of 200,000 likely to provide decent support for the US Dollar today. Earnings are also expected to pick up to 2.7% which would, in our view, continue to reinforce the likelihood of another interest rate hike from the Federal Reserve at its June meeting.