Sterling was resilient on Monday with GBP/EUR rallying to 2-week highs.

The dollar made net gains against the Euro with some evidence of month-end US demand and EUR/USD retreated to near 1.1000.

Sterling was resilient on Monday with GBP/EUR rallying to 2-week highs, but dipped on Tuesday amid month-end positioning.

China’s PMI data recovered strongly back into expansion territory for March.

The Australian dollar was able to make net gains, but the Canadian dollar was hurt by lower oil prices.

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 EUR/USD 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 EUR/USD dipped to lows around 1.1010. There is scope for further dollar buying on positioning grounds during Tuesday with choppy likely and EUR/USD around 1.1010 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%.

USD/JPY 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, USD/JPY 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.

The Lloyds business survey declined sharply to 6 for March from 23 previously. GBP/USD retreated to around 1.2330 and month-end position adjustment is liable to be a feature during Tuesday with further choppy trading inevitable.

Economic Calendar

Expected Previous
06:00 United Kingdom GDP (Q/Q) 0.00% 0.40%
06:00 United Kingdom GDP (Y/Y) 1.10% 1.10%
07:30 CHF Retail Sales (Y/Y)(FEB) -0.70% -0.10%
07:45 Consumer Spending MM(FEB) 0.10% -1.10%
07:55 German Unemployment Rate(M/M)(MAR) 5.10% 5.00%
07:55 German Unemployment Change(M/M)(MAR) 30K -10K
08:30 GBP Total Business Investment (Q/Q) -1.00%
08:30 GBP Current Account -16.0B -15.9B
09:00 CPI (EU Norm) Prelim YY(MAR) 0.50% 0.30%
09:00 CPI (EU Norm) Prelim MM(MAR) -0.10%
09:00 CPI (EU Norm) Final YY*(MAR) 0.20%
09:00 CPI (EU Norm) Final MM*(MAR) -0.30% -0.50%
09:00 Euro-Zone Core CPI (Y/Y)(MAR 01) 1.20%
09:00 Euro-Zone CPI (Y/Y)(MAR) 0.80% 1.20%
09:00 Euro-Zone CPI (M/M)(MAR) 0.20%
12:30 CAD GDP (M/M)(JAN) 0.10% 0.30%
12:30 CAD RMPI (M/M)(FEB) -2.20%
13:45 USD Chicago PMI(MAR) 45.9 49
14:00 USD CB Consumer Confidence(MAR) 121 130.7
23:50 JPY Tankan Non-Manufacturing Index 6 20

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.