The UK PMI services-sector index was revised up significantly to a final reading of 62.6 from the flash reading of 60.9. This was the strongest figure for 10 months as coronavirus restrictions were eased in the travel and leisure sectors, although business optimism dipped to a 17-month low. There was further strong upward pressure on costs with output charges increasing at the fastest pace on record. There was no significant change in the UK economic narrative with supply and demand fears. The data did provide an element of Sterling support and the UK currency was able to make headway into the New York open. There was divergence in equity market trends as the FTSE 100 index posted net gains, but Wall Street indices lost ground on fears over higher interest rates.
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The Euro-zone PMI services index for March was revised up to a 4-month high of 55.6 for March from the flash reading of 54.8. The Spanish PMI index was weaker than expected, but the Italian figure beat expectations with both in expansion territory. There was, however, a dip in business optimism to a 17-month low while strong upward pressure on costs continued with input costs and output charges both increasing at record-high rates for the month. The Euro was unable to gain any support from the data, but was held in tight ranges ahead of the New York open with Ukraine fears sapping underlying support. The EU Commission announced fresh sanctions on Russia including an import ban on coal and a ban on Russian ships docking in the EU.
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In comments on Tuesday, Federal Reserve Governor Brainard stated that inflation is much too high and subject to upside risks. She added that the Fed is prepared to take stronger action if inflation and inflation expectations suggest the need to do so which was an important hawkish shift. She also added that the central bank would tighten methodically through a series of rate hikes which suggested a preference for gradual moves. The ISM non-manufacturing index strengthened to 58.3 for March from 56.5 the previous month, although slightly below consensus forecasts. Production growth was little changed while new orders increased at a faster rate. Employment moved back into expansion for the month while supply-side difficulties persisted and there was a renewed decline in inventories. Cost pressures remained strong and the prices increased edged higher on the month with a reading only marginally below record highs.
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19.00 FOMC Minutes