[vc_row][vc_column][vc_column_text]The mood towards the pound improved after the UK’s manufacturing PMI delivered an unexpectedly positive reading for February.

The European Central Bank’s (ECB) January meeting minutes offered encouragement to the euro, meanwhile, as their tone proved more optimistic than anticipated.

A surprise contraction in the US services PMI saw the US dollar stumble ahead of the weekend as confidence in the underlying health of the world’s largest economy took a blow.

Demand for the Australian dollar weakened sharply thanks to a higher-than-expected unemployment rate, on the other hand, which appeared to raise the odds of a potential Reserve Bank of Australia (RBA) rate cut.

As markets had braced for the UK manufacturing PMI to slip back into contraction territory a surprise uptick from the index gave the pound a boost last week.

While the manufacturing sector accounts for a smaller percentage of UK gross domestic product than the services sector, investors were still encouraged by this evidence of renewed growth.

Coupled with a solid services PMI reading this reduced fears of the economy suffering a fresh slowdown in the first quarter, paving the way for GBP exchange rates to rally.

However, as comments from a French official stirred fresh anxiety over the possibility of the Brexit transition period ending without a trade agreement this soon knocked the pound off its positive footing.

February’s CBI reported retail sales index could offer GBP exchange rates another leg up, though, if it points towards a rebound in consumer spending.

Evidence that consumer confidence improved in the first quarter would add weight to hopes that the UK economy could deliver a stronger economic performance, boosting the appeal of the pound.

Even so, as long as tensions between UK and EU officials show signs of mounting a sense of anxiety could still keep the pound under a degree of pressure for the foreseeable future.

The relatively upbeat nature of the ECB’s latest set of meeting minutes encouraged the euro to trend higher across the board, in spite of the growing negative impact of global trade disruption.

As the ECB’s January meeting occurred before the extent of the Covid-19 outbreak became clear the positive impact of the minutes soon started to fade.

EUR exchange rates were able to hold onto a positive footing ahead of the weekend, however, after the German manufacturing PMI bettered expectations.

While the manufacturing sector remained trapped in a state of contraction the euro took encouragement from the fact that the PMI did not dip deeper, suggesting that the decline is bottoming out.

Although no revision to the finalised fourth quarter German gross domestic product is expected the details of the report could put renewed pressure on the single currency.

Any softening of the German consumer price index could also see EUR exchange rates fall out of favour, with weaker inflation giving the ECB less incentive to avoid monetary loosening.

The latest set of Eurozone business confidence surveys may encourage further demand for the euro, though, as long as sentiment shows signs of improvement.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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