The strength of manufacturing activity will be monitored around the world. Official Chinese figures have come in better than forecast, which has increased confidence in markets and is helping to weaken the safe-haven Japanese yen, while boosting so-called commodity currencies such as the Australian dollar. Attention now swings to Europe, where PMI final readings will be released and offer a gauge for first quarter growth. Upward revisions could increase uncertainty over what will happen at this week’s European Central Bank meeting. Weak price pressures will increase the chances for policy action at this week’s ECB policy meeting. Typically this would send the euro lower, but given lack of uncertainty prior to the release, the weaker figure actually benefited the euro because it gave clarity to markets. That clarity could be undone by strong growth figures. US economic data is expected to be ‘weather free’, meaning that negative skewing effects should not be seen in the manufacturing release, although construction spending may still see some. Strong data in the US could prove supportive for the dollar after dovish comments were heard from the head of the FOMC. In the UK, the declining pace of business lending slowed and was supportive for sterling. Manufacturing survey is expected to remain in expansive territory, which could continue to lift sterling. Strong growth figures will bring forward expectations for a rate increase and continue to strengthen the pound.

Sterling

The pace of declining business investment continued to slow. Data showed weaker consumer credit and a drop in mortgage approvals, although mortgage lending improved. The mixed data had limited impact on sterling, which will face CIPS PMI manufacturing figures. The PMI survey is expected to remain in expansive territory at 56.7 and could continue to provide support for the British pound.

US dollar

Chicago PMI figures were disappointing and the weaker manufacturing survey was quickly offset by comments from Janet Yellen. Yellen suggested that interest rates will remain low for an extended period. Equity markets rallied as the dollar recovered some of its earlier losses against the euro.

Euro

Eurozone HICP dropped to levels not seen since 2009 and came in even below a forecasted decline to 0.6 per cent. The reading of 0.5 per cent year-on-year increased the chances for some form of policy action and sent the euro racing higher in a move that initially appears counter-intuitive. There is a good deal of speculation that another symbolic rate cut may not be enough, but rather another LTRO or perhaps asset purchases could be added to a move on interest rates.