Pound Gains on Strong PMI Data, U.S. Dollar Stabilises
GBP
GBP/USD has risen 0.2% to 1.2569 (interbank), whilst GBP/EUR is currently at 1.1700 (interbank).
Sterling has surged following reports of the first overall growth in activity among British manufacturers in 20 months during March, indicating the end of last year's shallow recession.
The S&P Global/CIPS UK Manufacturing Purchasing Managers' Index climbed to 50.3, surpassing a preliminary March reading of 49.9 and rising from February's 47.5. This marks the first time the index has crossed the 50 threshold for growth since July 2022.
House price growth in the UK increased slightly to 1.6% annually in March from 1.2% in February, although monthly figures show a 0.2% decline after seasonal adjustments.
The Pound has been declining recently following the dovish statement from the BoE in its latest monetary policy announcement. BoE Governor Andrew Bailey indicated that market expectations for two or three rate cuts this year are “reasonable,” while noting that the central bank isn't observing significant persistence in economic trends.
While this week's data from the UK is relatively light, additional PMI data is expected to be released on Thursday and Friday.
Today’s Events (GMT):
07:00 - Nationwide HPI (Mar) - Actual: 1.6% vs Forecast: 2.4%
09:30 - UK Manufacturing PMI (Mar) - Actual: 50.3 vs Forecast: 49.9
EUR
EUR/USD has dipped by 0.1% and is currently trading at 1.0738 (interbank).
This decline comes in response to deteriorating manufacturing activity across the eurozone in March, with a steeper contraction compared to February.
The final eurozone Manufacturing Purchasing Managers' Index (PMI) compiled by S&P Global fell to 46.1 in March from February's 46.5, although slightly higher than the preliminary estimate of 45.7. Similarly, Germany's Manufacturing PMI dropped to a five-month low of 41.9 in March from 42.5, surpassing the preliminary figure of 41.6.
These figures have fueled speculation of a potential interest rate cut by the European Central Bank (ECB) in June. Persistent weak demand may further suppress inflationary pressures, prompting a more dovish stance from the ECB.
Market focus will be on the latest German inflation data this afternoon.
Today’s Events (GMT):
08:55 - Germany Manufacturing PMI (Mar) – Actual: 41.9 vs Forecast: 41.6
09:00 - Eurozone Manufacturing PMI (Mar) Actual: 46.1 vs Forecast: 45.7
13:00 - German CPI (Mar) - Forecast: 2.2%
USD
The dollar index, which measures the currency against a basket of other major currencies, remains largely unchanged at 104.755, slightly below the previous session’s peak of 105.07, the highest level since mid-November last year.
The U.S. dollar received a boost after data showed the first expansion in U.S. manufacturing since September 2022.
Last week’s Personal Consumption Expenditures (PCE) Price Index showed a rise to 2.5% year-on-year in February. The core PCE Price Index, excluding volatile food and energy prices, increased by 2.8% year-on-year, matching analysts' estimates and supporting the Federal Reserve's case for higher interest rates for an extended period.
While today’s data is light, there will be the latest releases on job openings and durable orders, both for February, ahead of Friday’s widely-watched payrolls report for March.
Additionally, a multitude of Federal Reserve speakers are scheduled throughout the week.
Today’s Events (GMT):
15:00 - Factory Orders (Feb) - Forecast: vs Forecast: 1.1%
15:10 - FOMC Member Bowman Speaks
17:00 - FOMC Member Williams Speaks
17:05 - FOMC Member Mester Speaks
18:30 - FOMC Member Daly Speaks
CAD
USD/CAD is currently trading at 1.3580 (interbank).
Last week, the Canadian dollar rallied following better-than-expected Canadian GDP data, which showed a 0.6% month-on-month increase in January compared to the forecasted 0.4%.
The Canadian dollar gained ground amid speculation that policymakers would not rush to cut rates and could potentially wait until September. Oil prices have also risen, with Brent Crude oil surpassing $88 a barrel for the first time since October due to increased geopolitical tensions, including attacks on Russian energy facilities and escalating conflict in the Middle East.
The quarterly Bank of Canada Business Outlook Survey is due this afternoon and is expected to show a marginal decrease in inflation expectations. The main economic data release for the week will be the latest employment data for March, with expectations of 25,000 new jobs added.
No significant events are scheduled for today.
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