March 24, 2025

“The PMIs today will be watched closely for clues on where the US and European economies are headed. The focus on Wednesday will be on the UK, where another fiscal event from the Labour government poses risks to the pound.”

Sam Cornford – Head of Trading

USD

The key concern for the dollar today is what the March PMIs have to say about a potential slowdown in the US economy. The market mood is slightly more upbeat and the dollar is slightly softer this morning after some nervousness helped it to rebound last week, with Trump signalling over the weekend that trade talks would happen this week with China. The upcoming data is expected to be soft, starting today with a stable 51.0 estimate for the services PMI index, which dropped sharply from 56.8 to 51.0 back in February. A sub-50 print – i.e. economic contraction – is a tail risk but not an impossible scenario today, given that markets are expecting consumer confidence to slump to 93.6 tomorrow – its worst since January 2021. Also on the agenda are speeches from the Fed’s Barr and Bostic today, the next round of US-Russia talks on Ukraine in Saudi Arabia, and the Fed-favoured core PCE measure of inflation on Friday.

GBP

Wednesday’s CPI data and Spring Statement will be pivotal for the pound. A new set of OBR forecasts are set to have wiped out Reeve’s headroom to her fiscal rules, and we can expect some cuts to the welfare bill and departmental spending to build that back up. The gilt market has become twitchy since the October budget and there are risks that disapproving foreign investors dump UK assets again. Today, Gov Bailey’s speech on UK economic growth is timely, as this morning’s composite PMI print is expected to hold steady at a stagnant 50.5.

EUR

The euro area PMI activity measures have been mixed this morning, but so far the euro appears to have escaped unscathed. Growth data has become even more important for the ECB now that April is a live decision and autopilot rate cuts are over. The French and German economies look to have done a touch better in March, with Germany moving more firmly into expansion at 50.9 while France has rebounded from 45.1 to 47.0. Once the PMIs have passed today, eyes will be on the US. The debt brake reforms were successfully pushed through Germany’s upper parliament on Friday and the optimism from the fiscal stimulus has begun to fade slightly – now the market’s attention can shift back to US trade policy.

Markets

European stocks suffered on Friday but Trump’s conciliatory tone on his trade war with China helped to lift US equities later in the day. Talks between US and Chinese trade representatives this week, alongside US-Russia talks in Saudi Arabia, appear to have boosted the mood this morning and futures are pointing to strong opens.

Main Economic Events (All Times CET)

10:00am: Eurozone PMIs
10:30am: UK PMIs
2:45pm: US PMIs

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