British Manufacturing Activity Eases

Even though today’s domestic manufacturing PMI report has shown that activity in the sector slowed down for March, it continues to remain firmly in the expansion phase. However, with recent economic data suggesting a moderation in growth, the BoE’s decision to consistently maintain low interest rates seems justified. Across the Atlantic, the Fed Chief surprised markets by offering a dovish view that the accommodative policy will remain in place for some more time. Against this backdrop, today’s ISM manufacturing data will be closely watched. In Europe, manufacturing PMIs have been modest this morning, shifting focus to the ECB policy meeting due later this week to ascertain if the central bank resorts to policy loosening.

Pound Sterling – UK Markets

Sterling has moved marginally lower against its major counterparts this morning after data just released indicated that the UK manufacturing PMI eased for March, although the sector continues to exhibit strength. Against the backdrop of the largely mixed domestic economic data of late, it remains to be seen if economic growth in the UK holds its pace during the first quarter of 2014. Going forward today, investors will keep a close watch on the US ISM manufacturing activity print for further direction. Furthermore, Sterling investors will closely follow this week’s domestic construction and services PMI reports. After trading in a tight range for most of yesterday’s trading session, the Pound moved higher against the US Dollar after the Fed Chief, Janet Yellen, confirmed that the central bank would continue with its monetary stimulus measures in the near term citing weakness in the domestic economic recovery and labour market. Meanwhile, data released at home indicated that mortgage approvals dropped more than expected for February, weighed down by bad weather conditions along with a contraction in business lending.

US Dollar – US Markets

The greenback was on a weaker footing against its major counterparts yesterday after the Fed Chief, Janet Yellen, indicated that the central bank would continue with its “extraordinary” commitment, in the form of its massive bond purchases programme and ultra-low interest rates, to support the economy for some more time, citing slowing pace of domestic economic recovery lately and the still weak US labour market. Additionally, manufacturing activity in Chicago region expanded at a slower than expected pace for March due to a fall in new orders. Against the backdrop of largely mixed regional manufacturing activity reports released last month, today’s ISM manufacturing data is unlikely to show a significant improvement for March. Meanwhile, data indicated that the annual rate of inflation in the Euro bloc dropped to its lowest level since November 2009 for March, thus adding to concerns over the possibility of deflation in the region. The US Dollar is largely range bound against its major peers this morning. Along with today’s manufacturing activity data in the US, investors will also keep a tab on the Euro zone unemployment data due later today for further direction to risk appetite.

Euro – European Markets

The common currency shrugged off yesterday’s dismal Euro zone inflation data and moved higher against the greenback tracking the US Fed Chief, Janet Yellen’s dovish comments. The consumer price inflation in the currency bloc fell to the lowest level since October 2009 for March, boosting speculation of deflation setting in the region. In the wake of last week’s comments from the ECB President which suggested the possible use of additional policy measures to counter low inflation, this week’s ECB policy meeting will be closely scrutinised by investors to ascertain the central bank’s policy stance. Meanwhile, the single currency has moved marginally higher against the US Dollar this morning tracking fairly modest economic data across Europe. The manufacturing PMIs in France, Spain and Italy have been encouraging, although the German manufacturing activity eased marginally for March. Also, the number of unemployed people in Germany dropped last month, once again highlighting the uneven nature of the nation’s economic recovery. Later today, markets will keep a close watch on the Euro bloc’s unemployment data along with the US ISM manufacturing activity data for further direction.

Other Currencies – Highlights

The Australian Dollar is trading in a tight range against the majors in today’s trading session. Earlier today, the Reserve Bank of Australia kept its key interest rate unchanged at 2.5%, stating that interest rates are likely to remain stable at the present low levels for a considerable period of time, while inflation is also expected to remain within the central bank’s 2-3% target over the next two years. The RBA Governor, Glenn Stevens, sounded optimistic as he opined that business and consumer sentiment have been improving of late while exports have also been showing an uptrend. Additionally, the mildly positive Chinese manufacturing PMI report kept the Aussie Dollar supported against the majors this morning. With little on the domestic macro front today, investors in the Australian Dollar will keep a tab on news flows emanating from both sides of the Atlantic for further direction. Additionally, some important domestic economic data scheduled later this week will keep investors interested in the Aussie Dollar.