Euro to Look Past PMIs, German Jobs Data as ECB Looms Ahead

The Euro may look past March’s final manufacturing PMI data and the German jobs report as markets await the ECB policy announcement later in the week.

Talking Points:

• Eurozone PMIs, German Jobs Figures Unlikely to Dislodge the Euro

• British Pound May Not Find Volatility in Manufacturing PMI Print

• Australian Dollar Little-Changed After Uneventful RBA Rate Decision

A seemingly busy docket of Eurozone economic activity data seems unlikely to produce meaningful direction cues for the Euro. The final revision of March’s Eurozone Manufacturing PMI reading is expected to confirm factory-sector activity growth slowed for a second consecutive month. Separately, Germany’s Unemployment report is forecast to show the ranks of the jobless shrank by 10,000 over the same period, marking the smallest drawdown in four months.

Both outcomes carry relatively limited implications for this week’s ECB rate decision and the monetary policy outlook in general considering Mario Draghi and company’s mandated focus on price stability. Indeed, if yesterday’s soft CPI data – an outcome that ought to have spoken directly to policy bets – was unable to shake the single currency, slowing cycle indicators are all the more likely to fall on deaf ears.

Similarly, a slight pullback on the UK Manufacturing PMI gauge will probably pass with little fanfare. The index is expected to nudge lower from 56.9 in February to 56.7 in March. UK economic data has increasingly outperformed relative to median forecasts over the past four months, which has supported an upward shift in the markets’ priced-in BOE monetary policy bets for the coming 12 months.

The rate-setting MPC committee has vocally talked down imminent rate hike possibilities and even adjusted its forward-guidance regime to telegraph as much last month. The resilience of the British Pound in spite of these headwinds suggests it is the longer-term outlook that is the object of speculation, in which case Sterling’s resilience will not be easily undermined by a nominal slowing of factory-sector activity in the short term (absent a dramatic deviation from the consensus view, of course).

A monetary policy announcement from the Reserve Bank of Australia proved to be a non-event, as expected. RBA Governor Glenn Stevens once again reiterated that “the most prudent course [going forward] is likely to be a period of stability in interest rates.” The Australian Dollar saw a bit of seesaw volatility in the immediate aftermath of the announcement but the currency is trading effectively flat against the majors heading into European hours.

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