UK destroys EU on latest PMI battle

The Pound opened this morning 0.5% lower across the board. However, with a completely unexpected bumper PMI reading, that loss was quickly recaptured. I suspect this won't be the last time we are surprised this week with the key data that is due out..

I expect to see possible large swings daily this week with the risk events we have ahead of us. The FX market has been calm the last 10-days after a really manic March, but we will likely witness the end of the month in the same state it started, hyper-volatile.

Let's start with today then and UK PMI is at a 6-month high and probably more importantly, easily beat the EU's result. 50.3 was forecast, a drop from 50.5, but instead a surprising 52 was realised (anything above 50 is in growth). As always, the services sector led the charge which is good news and timing for the government ahead of the Spring statement this Wednesday.

Speaking of, whilst a currency collapse is highly unlikely this time round from Chancellor Reeves, the Spring statement is a risk event. Talk of spending, cuts, debt and budgeting are all significant challenges and so what is said and done will impact the Pound near & long term. 

Before that, we have the latest UK inflation releases. Both the headline and core numbers are expected to be slightly lower against previous, but I wouldn't hold your breath. 

Finally Friday sees the final Q4 GDP result from the UK, but it's the retail sales figure that is more important here. January offered some relief for the Pound with strong retail numbers, but economists see a fall in activity for February.

A tricky week ahead then with too much uncertainty and too many variables to be able to offer a fair forecast on what could end up happening.



EUR
The Euro-Zone offered a similar tale of two stories when it came to business activity in March. Manufacturing hit an impressive 26-month high, but services slumped to a 4-month low (the UK literally had the opposite result).

An overall reading of 50.4 was lower than the expected 50.8, but was still up from the previous 50.2. However, PMI data is a direct battle between the EU & UK and it was one that was lost easily this time round by the Euro-Zone, who now have a bit of a mountain to climb as the year goes on to bridge that growth gap once again.

The EU offers almost nothing this week and so will be moved by events elsewhere. The Euro has done well to consolidate its new position of late, but we may now see this tested.



USD
The Dollar has a busy week ahead with 6 key data points being released. They will be just as crucial to traders and investors as the UK data is and so for those with exchanges in the pipeline, be aware of what is coming out and when.