Forex Flash: Chinese data miss triggers weakness – UBS (Barcelona) - China's HSBC PMI data came out weaker this morning in Asia, falling from 51.5 to 50.5. Coupled with the USD/JPY slipping back below 99.00, stock markets have fallen across the region. Later today Purchasing Managers' Indices are released across Europe. These will be closely followed to see if the renewed slowdown in the Eurozone is gathering pace. UBS Economics expects April's flash estimates will show further weakness with Germany's manufacturing data likely to decline from 49.0 to 48.0 and services from 50.9 to 50.0.

In particular, Germany's manufacturing PMI has begun declining again. “We also believe Polish PMI here as it tends to be a leading indicator of Germany's releases. Recently Poland's data has also started to weaken. This matters as Germany is the largest economy in the Eurozone, and as European Central Bank officials have begun to weigh cutting interest rates.” notes the UBS Research Team.

Over the last week, Board Member Asmussen said an interest rate cut was possible, Dutch central bank governor Knot said the ECB still has measures at its disposal, Bundesbank President Wiedmann said the ECB may reassess interest rates if economic data changes, ECB Vice President Constancio said inflation is coming down 'rather significantly' and President Draghi said the ECB hasn't seen an improvement in the data in the past two weeks.