Talking Points:

British Pound May Decline if Soft PMI Data Undermines BOE Policy Outlook
Australian Dollar Rallies After RBA Keeps Interest Rates Unchanged at 2.25%
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UK Services PMI data headlines the economic calendar in European trading hours. Expectations suggest the pace of activity growth in the non-manufacturing sector will modestly accelerate in March. UK economic news-flow has tended to disappoint relative to consensus forecast recently, warning that analysts may be overestimating the economy’s vigor and opening the door for a downside surprise. Such an outcome may push out bets on a Bank of England interest rate hike further into the future, weighing on the British Pound. As it stands, futures markets are pricing in expectations for the central bank to begin dialing back stimulus in the first quarter of 2016.

The Australian Dollar outperformed in overnight trade after the Reserve Bank of Australia kept interest rates unchanged at 2.25 percent. As we discussed in our weekly forecast, analysts narrowly expected the outcome but traders were pricing in a 75 percent probability of a 25bps reduction. RBA Governor Glenn Stevens said further easing may be appropriate and policymakers will continue to assess the case for such action at forthcoming meetings.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Perf of Services Index (MAR)

50.2

–

51.7

23:50

JPY

Official Reserve Assets ($) (MAR)

1245.3B

–

1251.1B

1:30

AUD

Retail Sales (MoM) (FEB)

0.7%

0.4%

0.5%

1:30

AUD

ANZ Job Advertisements (MoM) (MAR)

-1.4%

–

0.7%

4:30

AUD

RBA Cash Rate Target

2.25%

2.25%

2.25%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

CHF

Foreign Currency Reserves (MAR)

508.9B

509.3B

Low

7:45

EUR

Markit/ADACI Italy Services PMI (MAR)

51.0

50.0

Low

7:45

EUR

Markit/ADACI Italy Composite PMI (MAR)

–

51.0

Low

7:50

EUR

Markit France Services PMI (MAR F)

52.8

52.8

Low

7:50

EUR

Markit France Composite PMI (MAR F)

52.0

51.7

Low

7:55

EUR

Markit Germany Services PMI (MAR F)

55.3

55.3

Medium

7:55

EUR

Markit/BME Germany Composite PMI (MAR F)

55.3

55.3

Medium

8:00

EUR

Markit Eurozone Services PMI (MAR F)

54.3

54.3

Medium

8:00

EUR

Markit Eurozone Composite PMI (MAR F)

54.1

54.1

Medium

8:30

GBP

Official Reserves Changes ($) (MAR)

-1049M

Low

8:30

EUR

Eurozone Sentix Investor Confidence (APR)

20.8

18.6

Low

8:30

GBP

Markit/CIPS UK Services PMI (MAR)

57.0

56.7

High

8:30

GBP

Markit/CIPS UK Composite PMI (MAR)

–

56.7

High

9:00

EUR

Eurozone PPI (MoM) (FEB)

0.1%

-0.9%

Medium

9:00

EUR

Eurozone PPI (YoY) (FEB)

-2.9%

-3.4%

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0704

1.0830

1.0876

1.0956

1.1002

1.1082

1.1208

GBPUSD

1.4691

1.4801

1.484

1.4911

1.4950

1.5021

1.5131

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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