UK services sector strengthens.

The Euro-Zone manufacturing index dipped further to a 35-month low of 45.5 from 47.3 previously and below consensus forecasts of 48.0. The services sector index strengthened to a 12-month high of 56.6 from 55.0 and above market expectations of 54.5.

Although output prices increased at a strong rate for the month, it was the slowest rate of increase for 15 months.

The flash UK reading for the PMI business confidence data recorded a further manufacturing decline to a 3-month low of 46.6 for April from 47.9 previously and below expectations of 48.4. The services index strengthened to a 12-month high of 54.9 from 52.9 in March and above expectations of 52.9.

The composite outlook index also posted a 12-month high. Costs increased at the slowest rate since March 2021, but there was still a sharp increase in output prices with only a slight slowdown from record highs posted in April 2022.

The US manufacturing PMI index strengthened to a 6-month high of 50.4 for April from 49.2 and above consensus forecasts of 49.0. The services-sector index also strengthened to a 12-month high of 53.7 from 52.6 and above expectations of 51.5.

New orders increased at the fastest rate for 11 months, but export orders continued to decline. There was a faster rate of increase in input costs for the month and output prices increased at the fastest rate for seven months.

Fed Governor Cook stated that wages growth and hiring have slowed down. She added that the Fed is trying to figure out where the central bank needs to stop with rate hikes. The overall rhetoric was relatively dovish.

Over the weekend, Bank of England (BoE) Deputy Governor Ramsden stated that high inflation is a bigger risk than over-tightening and that he is focussed on staying the course on tightening. Markts continue to expect the BoE will raise rates in May.

There were reports over the weekend that the Bank of Japan would consider a long-term review of the impact of its easing policies.

At this stage, markets expect no change in monetary policy at this Friday’s policy meeting. Comments from Bank Governor Ueda were generally dovish on Monday.

The latest German IFO index is due for release on Monday Consensus forecasts are for a marginal increase from the March reading.

The dollar strengthened after the US PMI data as fears surrounding the US economy eased slightly. EUR/USD dipped to below 1.0950. The dollar failed to hold the gains with EUR/USD advancing to near 1.1000 before settling around 1.0980.

USD/JPY also failed to hold its best levels. USD/JPY settled just above 134.00 from highs at 134.50 before a net gain to 134.40 on Monday amid dovish BoJ expectations.

The Swiss franc overall was little changed. EUR/CHF settled just above 0.9800 with USD/CHF settling around 0.8925 from highs above 0.8950.

Sterling found some support on dips while comments from Bank of England’s Ramsden maintained expectations of a May rate hike. GBP/USD dipped to 1.2365 before a recovery to 1.2440 and held steady on Monday.

Commodity currencies recovered from intra-day lows on Friday but remained on the defensive amid fragile risk conditions. AUD/USD settled just below 0.6700 on Friday and lost ground to 0.6675 on Monday. USD/CAD trade just above 1.3550 on Monday as oil prices lost ground.