Euro comes under pressure

Despite some worse than expected UK economic data out for the second time this week, the pound continued to recover against the euro as the euro itself came under pressure yesterday.
In the UK, the Markit/CIPS services purchasing managers’ index (PMI) fell from 58.2 in February to a reading of just 57.6 in March, well below expectations and the slowest pace of activity since June 2013.

Chris Williamson, Chief Economist at Markit commented that "While March saw growth slow across the services, manufacturing and construction sectors, all three continue to expand at very strong rates, meaning the economy looks to have grown by at least 0.7% again in the first quarter. Policymakers will be concerned that growth could ease further if sterling continues to appreciate, but there’s no evidence to suggest that any slowdown will be anything other than modest, adding to indications that the UK is set to see growth outpace its peers in 2014."

Something of a surprise from Bank of England Governor Mark Carney who in remarks to a newspaper refused to rule out the possibility of an interest rate increase in the UK before the next elections. Carney went on to say that in his opinion, there continues to be slack in the labour market which needs to be used up before rates can rise but any rise in the UK bank base rate will be gradual and the recovery continues to be uneven.
All eyes were on the European Central Bank (ECB) and their President Mario Draghi. Although the ECB kept policy unchanged for at least another month, in his press statement Draghi confirmed that the ECB had held lengthy talks about the prospect of quantitative easing (QE) amid pressure to tackle falling inflation in the euro zone.

Draghi said while short-term inflation rates continue to fall, expectations in the long-term remain firmly anchored towards the ECB’s 2% target.

Draghi stated that “The governing council is unanimous in its commitment to using conventional and unconventional measures within its mandate to address period of long-medium low inflation.”
In the US, the ISM's services purchasing managers' index rose at a stronger pace than had been expected, rising from a reading of 51.6 in February to 53.1 in March.

For the third day in a row, the US dollar made gains against the euro.

Overnight in China, the government announced what is being dubbed as a 'mini' stimulus with measures to boost the economy in light of recently disappointing data. Measures include reducing taxes on small firms and a 18% hike in the total number of railway lines being built.