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The Euro-zone industrial sentiment index declined to -10.8 for March from -6.2 previously with a sharper downturn in services, although the figures were slightly above consensus forecasts. German consumer prices increased 0.1% for March with the year-on-year rate declining to 1.4% from 1.7% and matching market expectations.

The German council economic advisors stated that a recession is unavoidable this year. In their baseline scenario of the situation normalising over the summer, the economy is forecast to contract 2.8% this year. There were, however, two alternative scenarios with a GDP contraction of up to 5.4% before a recovery next year.

The Euro was unable to make any headway ahead of the New York open and declined to the 1.1050 area.

The Dallas Fed manufacturing index declined to -35.3 for March from 16.4 previously and the wider general conditions index crashed to a reading of a record low of -70 from 1.2 the previous month with less than 0.5% of respondents stating that conditions had improved over the month.  

Despite domestic fears, the dollar overall continued to make headway with support from reservations surrounding the global growth outlook and weaker equity markets.

The US currency maintained a strong tone even when equity markets recovered ground with evidence of month-end dollar demand and the Euro declined to lows around 1.1010 before a correction. There is scope for further dollar buying on positioning grounds during Tuesday with the Euro around 1.1020 in early Europe.


The dollar was able to make headway against the Japanese currency ahead of the US open as equity futures moved higher. The dollar maintained a firm tone in New York, although the move was hampered by gains in Treasuries as the 10-year yield declined to lows near 0.62%.

The dollar edged to highs around 108.30 before retreating again to 107.75 as the US currency retreated.

China’s official PMI manufacturing index recovered strongly to 52.9 for March from 35.7 previously and above consensus forecasts of 44.8 with the non-manufacturing index at 52.3 from 29.6 previously with new orders also in expansion territory. There was an important element of scepticism over the data which limited any potential boost to risk appetite. Japan’s economy minister Nishimura stated that the government was preparing a big economic package. He also stated that Japan was not yet at a stage to declare a national emergency. There was evidence of dollar demand on the last day of Japan’s fiscal year and month-end demand is liable to lead to further market volatility during Tuesday. Overall, the dollar advanced to above 108.50 in early Asia before a retreat to 108.25.


UK mortgage approvals increased to 74,000 for February, the strongest reading since January 2014, and net lending also increased for the month, although there will inevitably be a very sharp slowdown in the short term. A government spokesman stated that UK-EU talks on a future trade relationship were taking place on a continuing basis, but it seems very doubtful that significant progress will be made in the short term given the coronavirus dominance of political machinery. There were also further calls from EU lawmakers that the transition period should be extended.

Sterling was again subjected to volatile trading during the day with losses after rumours that further lockdown measures could be put into effect. The UK currency was, however, resilient with buying on dips with some very tentative hopes that the coronavirus spread was slowing. It settled around 1.2400 against the dollar in Europe while the Euro retreated to 2-week lows around 0.8870. The Lloyds business survey declined sharply to 6 for March from 23 previously. Sterling retreated to around 1.2330 against the dollar as European currencies slipped and month-end position adjustment is liable to be a feature during Tuesday with choppy trading. The Euro recovered slightly to the 0.8925 area while the UK fourth-quarter current account data was better than expected with the UK currency above 1.2350.


The Swiss KOF business confidence index declined to 92.9 for March from a revised 100.9 previously, which was the weakest since early 2015, although it was above consensus forecasts which provided an element of support to confidence.

National Bank sight deposits increased to CHF620.5bn in the latest week from CHF608.8bn the previous week. This was a further significant increase from the previous week and indicates that the bank had stepped-up intervention to prevent franc gains. The Euro was, however, unable to make headway and settled just below 1.0600 against the franc while the dollar made significant gains to the 0.9600 area with the franc holding steady on Tuesday as the Euro remained below 1.0600.



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