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According to flash data, the German PMI manufacturing index strengthened sharply to a record high of 66.6 for March from 60.7 previously and well above consensus forecasts of 60.8. The services-sector also posted a gain to 50.8 from 45.7 and confounding expectations of a further monthly contraction.

The Euro-zone manufacturing index strengthened to 62.4 from 57.9 and well above consensus forecasts while the services index recovered to 48.8 from 45.7, although the sector remained in contraction territory as coronavirus restrictions remained in place.

The data provided an immediate boost to the Euro, but the single currency was unable to sustain the advance amid an underlying lack of confidence. German Chancellor Merkel announced that the 5-day lockdown over Easter announced yesterday would be scrapped as it was unworkable, reinforcing a lack of confidence in policies. The Euro retreated to fresh 4-month lows just above 1.1810 as the dollar maintained a robust tone.

February durable goods orders declined 1.1% for February after a 3.5% advance the previous month and close to expectations while underlying orders declined 0.9%.

The US PMI manufacturing index edged higher to 59.0 for March from 58.6 previously, although slightly below consensus forecasts while the services-sector index advanced marginally to 60.0 from 59.8 in February. Overall confidence in the US recovery remained strong.

Euro-zone consumer confidence recovered to a 12-month high of -10.8 for March from -14.5 the previous month, but underlying Euro sentiment remained weak amid on-going reservations over the recovery outlook. The dollar held a firm tone on Thursday with the Euro close to 4-month lows around 1.1815.



US bond yields moved higher after the New York open which provided significant US dollar support, especially with equities making significant headway.

Atlanta Fed President Bostic stated that he thought 2023 would be the time to start seeing higher interest rates. San Francisco Fed President Daly maintained a dovish stance and stated that the Fed will not be pre-emptively taking away the punch bowl and would not raise rates until there was a sustained achievement of the 2% inflation target. Fed Chair Powell reiterated that there would be near-term upward pressure on prices, but he expects it will be transitory and temporary. In their second day of testimony, Powell and Treasury Secretary Yellen put greater emphasis on the prospects of a strong economic recovery that underpinned the dollar.

US equity futures edged higher on Thursday and there were some reports that official accounts were buying Chinese equities which helped reverse losses in the Shanghai index. There was little change in bond yields, but the dollar advanced to near 109.00 against the yen as the Japanese currency retreated.


Sterling retreated further after the much weaker than expected inflation with a slide to 6-week lows below 1.3700 against the dollar and the Euro advanced to 0.8645.

The UK PMI manufacturing index strengthened to a 40-month high of 57.9 for March from 55.1 previously and above consensus forecasts. There was also a significant gain in the services sector index to 56.8 from 49.5 and well above expectations. There were still important supply-side issues within the manufacturing sector and exports remained weak. There was a surge in optimism in the services sector with an advance to 16-year highs.

The Pound did secure a boost from the stronger than expected business confidence data but struggled to sustain the gains, especially with concerns over vaccine developments. The EU Commission formally proposed tighter controls on vaccine exports and the plans will be discussed by EU leaders on Thursday.

Sterling will be vulnerable if the leaders back plans which effectively block exports to the UK, although the timeline for a decision is unclear. 

Bank of England Chief Economist Haldane stated that the economic recovery will come quickly with people desperate to get out and spend while excess savings were around £150bn. Sterling was unable to make headway and remained below 1.3700 against the dollar in early Europe with the Euro around 0.8635.


The Swiss franc edged lower on Wednesday with the franc and yen tending to lose ground in global markets. The Euro edged higher to the 1.1070 area while the dollar advanced to highs at 0.9370. Markets continued to monitor EU vaccine developments with potential franc support if the row escalates.

The National Bank will announce its latest monetary decision on Thursday with no change in policy expected and interest rates held at -0.75%. Rhetoric from the bank, especially on the franc will be watched very closely. The franc resisted further losses in early Europe on Thursday with the dollar holding above 0.9350.



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