Euro, Pound at Risk as Soft PMIs Set the Stage for ECB and BOE

DailyFX

The Euro and the British Pound may come under pressure if soft manufacturing PMIs boost stimulus bets before ECB and BOE rate decisions later in the week.

Talking Points

  • Euro, British Pound May Decline as Soft PMIs Boost Stimulus Bets
  • Another German CPI Drop Could Amplify ECB Easing Expectations

The round-up of European Manufacturing PMI figures headlines the economic calendar in European hours. The final revision of the region-wide Eurozone gauge is expected to confirm factory-sector activity contracted at the fastest pace in three months in March. Meanwhile, the analogous UK measure is seen edging slightly higher over the same period while but still holding below the critical 50 “boom-bust” threshold, signaling manufacturing shrank for a second consecutive month.

The reports may weigh on the Euro and the British Pound, pushing traders’ monetary policy expectations toward the accommodative side of the spectrum ahead of the ECB and BOE rate decisions on tap later in the week. While neither central bank is forecast to change the policy mix this time around, signs of a deepening slump in the region may prompt the markets to expect a dovish shift in rhetoric foreshadowing added easing on the horizon in the months ahead.

A further slowdown in German CPI inflation would reinforce the likelihood of such a scenario. The year-on-year price growth rate is expected to decline to 1.3 percent in March, marking the weakest reading since December 2010 and hinting that the ECB is being offered increasingly ample room to stimulate growth without worrying about inflationary pressures.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

AUD

AiG Performance of Manufacturing Index (MAR)

44.4

-

45.6

23:00

AUD

RPData-Rismark House PX Actual (MAR)

1.3%

-

0.3%

23:01

GBP

Lloyds Business Barometer (MAR)

20

-

13

23:50

JPY

Monetary Base (YoY) (MAR)

19.8%

-

15.0%

0:00

NZD

ANZ Commodity Price (MAR)

7.4%

-

1.1% (R+)

1:30

JPY

Labor Cash Earnings (YoY) (FEB)

-0.7%

-0.2%

0.1% (R-)

3:30

AUD

Reserve Bank of Australia Rate Decision

3.0%

3.0%

3.0%

5:30

AUD

RBA Commodity Price Index (MAR)

87.9

-

87.9 (R-)

5:30

AUD

RBA Commodity Index SDR (YoY) (MAR)

-7.5%

-

-6.5% (R+)

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:30

CHF

PMI Manufacturing (MAR)

48.3 (A)

50.8

Medium

7:45

EUR

Italian PMI Manufacturing (MAR)

44.5 (A)

45.8

Low

7:50

EUR

French PMI Manufacturing (MAR F)

44.0 (A)

43.9

Low

7:55

EUR

German PMI Manufacturing (MAR F)

48.9

48.9

Medium

8:00

EUR

Euro-Zone PMI Manufacturing (MAR F)

46.6

46.6

Medium

8:00

EUR

Italian Unemployment Rate s.a. (FEB P)

11.8%

11.7%

Low

8:30

GBP

PMI Manufacturing (MAR)

48.8

47.9

Medium

8:30

GBP

Net Consumer Credit (FEB)

0.4B

0.4B

Low

8:30

GBP

Net Lending Sec. on Dwellings (FEB)

0.4B

0.1B

Low

8:30

GBP

Mortgage Approvals (FEB)

53.7K

54.7K

Medium

8:30

GBP

M4 Money Supply (MoM) (FEB)

-

0.9%

Low

8:30

GBP

M4 Money Supply (YoY) (FEB)

-

-0.8%

Low

8:30

GBP

M4 Ex IOFCs 3M Annualised (FEB)

5.0%

5.6%

Low

9:00

EUR

Euro-Zone Unemployment Rate (FEB)

12.0%

11.9%

Medium

12:00

EUR

German CPI (MoM) (MAR P)

0.4%

0.6%

High

12:00

EUR

German CPI (YoY) (MAR P)

1.3%

1.5%

High

12:00

EUR

German CPI - EU Harmonised (MoM) (MAR P)

0.3%

0.8%

Low

12:00

EUR

German CPI - EU Harmonised (YoY) (MAR P)

1.7%

1.8%

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2790

1.2887

GBPUSD

1.5191

1.5280

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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