What’s been happening?

Pound Sterling – UK Markets 

The British pound started the week on a strong footing and gained value against the euro and the dollar after the data published by the IHS Markit revealed that the economic activity in the manufacturing sector grew at a more robust pace in March than previously estimated. Commenting on the data, “manufacturers reported a surge of business activity in March as companies stepped-up their preparations for potential Brexit-related disruptions. Output, employment, and new orders all rose at increased rates as manufacturers and their clients raced to build safety stocks. Stocking of finished goods and input inventories surged to new survey-record highs,” Rob Dobson, Director at the IHS Markit, said.

US Dollar – US Markets

The U.S. Census Bureau on Monday reported that retail sales in February declined by 0.2% on a monthly basis following January’s 0.7% growth and fell short of the market expectation of +0.3%. The IHS Markit said that the business activity in the manufacturing sector expanded at a slower pace than February with the March PMI dropping to 52.4 from 53. “A further deterioration in the manufacturing PMI suggests the factory sector is acting as an increasing drag on the US economy. The March survey is consistent with production falling at a quarterly rate of 0.6% according to historical comparisons with official data,” Chris Williamson, Chief Business Economist at the IHS Markit noted.

Despite the disappointing Markit PMI data, the ISM said the manufacturing sector continued to gather momentum in March. “Comments from the panel reflect continued expanding business strength, supported by gains in new orders and employment,” the ISM said in its publication. Furthermore, other data revealed that construction spending increased by 1% in February to post its third straight monthly gains. Following the initial negative reaction to the first set of the data from the U.S., the US Dollar Index gained traction and closed the day modestly higher.

Euro – European Markets

The shared currency weakened against both the euro and the dollar on Monday amid disappointing Manufacturing PMI reports, which showed that the sector contracted both in the euro area and Germany. “The March PMI data indicate that the euro zone's manufacturing sector is in its steepest downturn since the height of the region’s debt crisis in 2012. The survey is indicative of output falling at a quarterly rate of approximately 1% in March, suggesting that the January rebound from one-off factors late last year seen in the latest official data is likely to prove short-lived,” stated Chris Williamson. Additionally, Germany’s PMI slumped to its lowest level in 80 months of 44.1.

While presenting the European Central Bank’s Annual Report later in the day, Luis de Guindos, Vice-President of the ECB, said that the absence of clarity related to the outcome of the Brexit process contributed to higher political and policy uncertainty. Furthermore, ECB President Draghi reiterated that a substantial monetary policy stimulus was needed to ensure the continued build-up of domestic price pressures over the medium-term.

What’s coming up? 

UK: The IHS Markit’s Construction PMI will be released on Tuesday.  

US: Durable goods orders, ISM-NY Business Conditions Index and total vehicle sales data will be published in the U.S. 

EU: Producer Price Index (PPI) will be the only data featured in the European economic docket on Tuesday.