We started the week with a raft of economic data released from the US, UK and the Eurozone. UK manufacturing PMI and Eurozone CPI dominated the morning’s headlines with both figures exceeding economists’ consensus.
UK manufacturing PMI posted its highest figure in seven months with a figure of 54.1, as domestic strength offset Britain’s weak export market.
Also yesterday morning saw the release of CPI in the Euro region, a figure which although remained in deflationary territory declined less than forecast at -0.3%. Unemployment in the Euro also beat expectations, registering its lowest reading in nearly three years at 11.2%.
In the afternoon, ISM manufacturing PMI from the US disappointed markets by posting its worst reading since February 2014, as the bad weather in the States begins to filter through to the world’s biggest economy.
This week’s main event is likely to be the European Central Bank’s monetary policy meeting in Cyprus on Thursday and the start of its multi-billion quantitative easing programme. The ECB will no doubt face heavy scrutiny over Greece at this week’s press conference due to the geographical location of the meeting. Any mention about bailouts and/or Greek debt negotiations should cause high levels of volatility in the Euro currency.
China unexpectedly slashed interest rates over the weekend in an effort to spur growth in the world’s second largest economy. The People’s Bank of China lowered the one year deposit rate by 25 basis to 2.5% and the one year lending rate by the same amount to 5.35%. The surprise move has suggested that Beijing are getting more aggressive in attempts to stimulate growth, with many economists’ believing that further cuts will follow.
Across the world, central banks have been cutting their interest rates in attempts to stimulate growth. Overnight, the Reserve bank of Australia were expected to cut the interest rates for the second time in as many months. However the RBA unexpectedly kept rates on hold at their historic low of 2.25%. This strengthened the Australian dollar against a number of currencies. In a statement which followed, the RBA left the door open for further easing in the future.