EUR / USD
The Euro-zone PMI manufacturing index retreated to a 14-month low of 57.0 for March from 58.0 the previous month, but above consensus forecasts of 56.0 while the services index was also above expectations despite a retreat to a 2-mnth low of 54.8 from 55.5 in February. Costs rose sharply with the input prices index registering the strongest increase on record by a substantial margin while the rate of inflation for output prices also reached a record high.
The data provided an element of relief surrounding the Euro-zone economy and the Euro managed to secure further support just above weekly lows.
The US PMI manufacturing index strengthened to a 6-month high of 58.5 for March from 57.3 previously and above expectations of 56.3 while the services sector also beat expectations by a substantial margin with a gain to an 8-month high of 58.9 from 56.5. There was a stronger rate of increase in new orders for the month while there was further strong upward pressure on prices with services costs increasing at close to the fastest rate on record.
The data indicated strength in the US economy, but the dollar was unable to secure support from the release and the Euro moved back to the 1.1000 area.
ECB council member Schnabel stated that the central bank may need to reconsider the end of bond purchases if there is a deep recession. The dollar lost ground on Friday, however, and the Euro strengthened to around 1.1025. There is the risk of choppy trading during the day given pre-weekend position adjustment.
US initial jobless claims declined to 187,000 in the latest week from a revised 215,000 previously and below consensus forecasts of 215,000 while continuing clams declined to 1.35mn from 1.42mn which maintained confidence in the labour market.
Durable goods orders declined 2.2% for February compared with expectations of a 0.5% decline while underlying orders declined 0.6%.
Fed Governor Waller stated that he was looking closely at the real-estate sector to judge the appropriate policy stance. Chicago Fed President Evans commented that personally he would be comfortable with 25 basis-point hikes, although he was open-minded over the possibility of 50 basis points.
US bond yields were little changed on the day, but the Japanese currency remained under heavy pressure as funds jumped on the weaker trend. Wall Street equities posted significant gains and the dollar strengthened sharply to highs above 122.00 with the Euro also posting strong gains to 134.30.
The dollar peaked just above 122.40 against the yen, but there was a sharp correction in Asia as Japanese yields increased and the Bank of Japan appeared reluctant to buy bonds to push yields lower. The US currency dipped sharply to lows near 121.20 before a recovery to 121.75 with strong US buying on dips.
The latest UK PMI business confidence data recorded a decline in the manufacturing index to a 13-month low of 55.5 for March from 58.0 previously and well below forecasts of 57.0.The services-sector index, however, strengthened to a 9-month high of 61.0 from 60.5 previously and comfortably above forecasts of 58.0. There was a stronger rate of growth in new orders and the labour market remained strong while capacity constraints eased slightly. Cost pressures remained very strong and average prices increased at the fastest rate on record. Overall business confidence declined by the largest amount since the pandemic started with a decline to 17-month lows.
The CBI retail sales index retreated to 9 for March from 14 previously and slightly below consensus forecasts with markets generally pessimistic over the outlook.
The headline PMI data provided an element of relief, but there were concerns over the slide in confidence and the threat of weaker conditions as energy costs surge.
Sterling found support around 1.3160 against the dollar and recovered slightly while the Euro edged higher to 0.8350.
UK consumer confidence dipped to a 16-month low of -31 for March from -26 previously. Retail sales declined 0.3% for February compared with expectations of a 0.5% increase. The data maintained unease over the UK outlook, although Sterling traded just above 1.3200 against the generally weaker US dollar.
The Swiss National Bank held interest rates at -0.75% at the latest policy meeting, in line with expectations. The central bank repeated that it was prepared to intervene in currency markets, but there was a shift in rhetoric as it noted the overall currency situation and the inflation rate differential with other countries would be taken into consideration. This shift in stance indicated that it would tolerate gradual franc appreciation over time. The Euro dipped lower, although it did recover to 1.0240 while the dollar retreated to near 0.9300. The franc secured a net advance on Friday with the dollar dipping to 0.9275 amid wider US losses.