On April 2, a survey revealed that supply chain disruptions boosted manufacturing growth figures in the Eurozone, with March's manufacturing growth rate reaching its strongest level in nearly four years. However, underlying demand remained weak, and soaring input costs due to the Iran conflict are threatening the sector's fragile recovery. Conflicts in the Middle East have disrupted global logistics networks, causing delivery delays, which partly inflated overall growth indicators and pushed input price inflation to its highest level since October 2022. Data showed that the Eurozone's S&P Global Manufacturing Purchasing Managers' Index (PMI) rose to 51.6 in March from 50.8 in February, exceeding the preliminary estimate of 51.4. A reading above 50 indicates expansion in the sector. Joe Hayes, Chief Economist at S&P Global Market Intelligence, stated, "The Middle East conflict has left its mark on Eurozone manufacturing. As logistics markets adjust to maritime disruptions, supplier delivery times have significantly lengthened, while surging oil and energy prices have driven factory input cost inflation to its highest since late 2022."
Additionally, Bank of England Governor Andrew Bailey remarked that financial markets are currently "jumping the gun" in their expectations for the central bank to raise interest rates to curb inflation. Bailey noted in an interview that policymakers need to control inflation in a way that "minimizes damage to economic activity and employment." Previously, markets had priced in up to four rate hikes after the Bank of England indicated last month it was "ready to take action on inflation." Commenting on this pricing, Bailey said, "I still think that's a judgment the market has to make, but I think they are jumping the gun." He added, "We must, of course, take action on monetary policy if we think it appropriate. But in my view, and it remains so today, the most important thing is to address the source of the shock." He also pointed out that businesses have limited ability to pass on cost increases to consumers.
Key data to watch today include US March Challenger Job Cuts, US February Trade Balance, US Initial Jobless Claims for the week ending March 28, and Canada's February Trade Balance.
**US Dollar Index** The US Dollar Index declined yesterday, hitting a one-week low, with the current exchange rate hovering around 99.90. Besides persistent pressure from renewed expectations of Federal Reserve rate cuts, signs of easing tensions in the Middle East, which reduced safe-haven demand for the dollar, also contributed to the index's weakness. US economic data released during the session was generally positive but had limited impact on the market. Today, focus is on resistance near 100.50, with support around 99.50.
**Euro/US Dollar** The euro rose yesterday, briefly breaking above the 1.1600 mark to reach a one-week high, with the current exchange rate trading around 1.1550. The dollar's weakness, driven by reduced safe-haven demand and renewed Fed rate cut expectations, supported the euro's climb. However, fading expectations for European Central Bank rate hikes limited the pair's upside. Today, watch for resistance near 1.1650, with support around 1.1450.
**Pound/US Dollar** The British pound advanced yesterday, reaching a three-day high, with the current exchange rate trading around 1.3250. The dollar's decline, pressured by renewed Fed rate cut expectations and reduced risk aversion, underpinned the pound's rise. Additionally, continued positive impact from the UK's recent strong GDP data provided further support. Today, monitor resistance near 1.3350, with support around 1.3150.
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