What’s been happening?

Pound Sterling – UK Markets 

The pound sterling continued to weaken against the dollar and the euro on Tuesday but gathered strength later in the day on hopes of British Prime Minister Theresa May coming up with a Brexit plan that will be supported by the opposition Labour party. In a speech, PM May announced that she will ask the EU for another short extension to Article 50 to “break the logjam” and that she will meet Labour Party’s leader Jeremy Corbyn with an aim to agree on a withdrawal plan. Responding to the PM’s announcement, Corbyn said that he was “very happy” to talk about Brexit with PM May and added that they will bring the vote of confidence back to Parliament if the government failed to get a majority in Parliament. 

Earlier in the day, the data published by the IHS Markit showed that the economic activity in the construction sector contracted in March with the PMI reading coming in below the 50 marks. Commenting on the data, “The situation in the UK construction sector was broadly unchanged from February, with PMI data posting a second consecutive month in contraction. The fault of this continuing inertia was placed squarely at the feet of Brexit,” Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said.

US Dollar – US Markets

The US Dollar Index climbed higher for the fifth straight trading day on Tuesday and touched its highest level in more than three weeks. Although the data from the U.S. didn’t provide any fresh clues suggesting that the economic slowdown is temporary, the greenback didn’t have a difficult time finding demand as a safer investment alternative. 

The U.S. Census Bureau in its advance report announced that durable goods declined by 1.6% on a monthly basis in February to come in slightly better than the market expectation for a contraction of 1.8%. “Excluding transportation, new orders increased 0.1 percent.  Excluding defense, new orders decreased 1.9 percent,” the publication read. Other data from the U.S. revealed that the ISM-NY’s Business Conditions Index improved to a 4-month high of 66.9 in March from 61.1 in February. 

Euro – European Markets

The shared currency struggled to find demand on Tuesday amid a lack of euro-positive fundamental drivers. The only data from the euro area showed that the producer price index (PPI) increased by 0.1% and 3% on a monthly and yearly basis in February, respectively, to match the market expectation.

Commenting on the European Central Bank’s monetary policy outlook, Governing Council Member Coeure said that the policy’s normalization would depend on economic indicators and added that forward guidance would be needed “for a good while yet.” On a similar note, Governing Council Member Villeroy stated that the monetary policy would remain accommodative as long as necessary to achieve the ECB’s price target. “Depending on the flow of economic data, the timing can be adapted with any necessary flexibility. And the intensity of the various mechanisms should be calibrated with total pragmatism,” Villeroy explained.

What’s coming up? 

UK: The IHS Markit will release the Services PMI report on Wednesday.   

US: The ADP’s private sector employment report alongside the IHS Markit’s and the ISM’s non-manufacturing PMI data. Atlanta Fed President Raphael Bostic and Minneapolis Fed President Kashkari will be delivering speeches as well. 

EU: The Eurostat will publish February retail sales figures on Wednesday. Services and Composite PMI data released by the IHS Markit will be watched closely by the market participants.