A fairly busy day in terms of fundamental data prompted volatility across the markets on Tuesday with the pound ending the day up against the euro but slightly down against the US dollar.

Initial market data from Europe included the German, French and composite PMI data for the service and manufacturing sectors. The French PMI data was better than expected albeit a negative figure however the German data really damaged the strength of the euro. This was the 19th time in 20 months that the euro zone composite PMI data fell.

A fairly busy day in terms of fundamental data prompted volatility across the markets on Tuesday with the pound ending the day up against the euro but slightly down against the US dollar.

Initial market data from Europe included the German, French and composite PMI data for the service and manufacturing sectors. The French PMI data was better than expected albeit a negative figure however the German data really damaged the strength of the euro. This was the 19th time in 20 months that the euro zone composite PMI data fell.

To compound the euro’s troubles, increasing pressure surrounding Europe’s interest surfaced once again. This time it was the turn of ECB board member, Christian Noyer warning that the lack of lending to small firms remains a ‘major concern’ and that a growing number of central bank officials are showing a greater willingness to drop the interest rate. A decrease in the base rate in Europe may assist small businesses and liquidity in the lending market but price stability of the euro would inevitably be at risk. Having said that, it could be argued that despite direct monetary policy not being implemented to devalue the euro; decreasing the interest rate would definitely be the next best option.

The UK saw borrowing increase more than expected in March although the UK government are still adamant that a deficit reduction of £300m is moving them in the right direction and inline to completely eradicate sovereign debt by 2017.

The US markets also published manufacturing PMI data which also failed to meet expectations illustrating the weakest expansion since October.

Overnight the Reserve Bank of New Zealand decided to keep interest rates on hold at 2.5%. RBNZ Governor Graeme Wheeler commented that growth in the country has picked up, however the ‘overvalue’ of the currency is hurting exporters.

Data from Australia showed that inflation rose in the first quarter to 0.4%, however missed expectations of a rise to 0.7%. The disappointing figures caused the Australian dollar to weaken overnight and will add to the recent speculation that the Reserve Bank of Australia will be looking to reduce interest rates in the future.

The euro could come under pressure if German Business Climate Index figures disappoint. Economists are expecting confidence to fall from 106.7 to 106.2, but if the figures are even lower than that, then the recent speculation of an interest rate cut by the European Central Bank will no doubt intensify and thus we could see the euro weaken further.

BBA Mortgage Approvals are expected to increase in the UK from 30.5k to 31.2k. However investors will still really be focused on the GDP figures due on Thursday morning and perhaps muted reactions of the pound against many of its peers is really the calm before the storm.

Key Announcements:

9.00am – EUR – German IFO Business Climate (Apr): Expected to fall to 106.2.

9.00am – EUR – German IFO Current Assessment (Apr): Expected to fall to 109.5.

9.00am – EUR – German IFO Expectations (Apr): Expected to fall to 103.

9.30pm – GBP – BBA Mortgage Approvals (Mar): Expected to rise to 31.2k.

13.30pm – USD – Durable Goods Orders (Mar): Expected to fall to -2.8%.