Services PMIs to watch amid RBA's hawkish stance and sanction worries

On Tuesday, gold prices fell as the U.S. dollar held firm and European stock markets are expected to open cautiously, with investors digesting the potential for more sanctions against Moscow, which could result in higher commodity prices and inflation concerns. At the same time, the markets monitor the PMIs of the major economies in the U.K., Eurozone, and U.S.. Additionally, U.S. markets registered a strong session, driven mainly by a strong tech rebound. However, it should be noted that the domestically focused Russell 2000 just barely managed to break into the green.  

A rate hike is on the way sooner than the RBA initially expected.

The recent Reserve Bank of Australia rate decision has seen the central bank change its forward guidance. This sets the stage for a rate hike soon, thus strengthening the Australian dollar. In the coming months, the Board will have access to additional evidence on both inflation and the evolution of the labour market, leading to a decision on additional hawkish policies. 

Consumer price data is due on April 27, and analysts expect it to show core inflation jumped by at least 1.0% in the first quarter, bringing it to at least 3.2% for the year. Inflation would have surpassed the RBA's 2-3% target band for the first time since early 2010, and it would be harder to maintain emergency low rates. While the Australian dollar soared to a nine-month high on Tuesday, the euro was near a one-week low amid speculation that more sanctions would be imposed on Russia.

Highly expected services PMIs from the eurozone and U.K.

Among the slew of European economic data on Tuesday are the March manufacturing and services PMI statistics from across the region and the February industrial production figures from France. In France, the services PMI is expected to go up from 55.5 to 57.4, while Germany's services PMI is anticipated to reach 55. There is likely to be a dip in Italian services PMI to 51.5, while Spain's PMI is forecast to drop to 54.3.

Service sector activity in the U.K. is expected to remain steady at 61. However, in a worrying development for Q2, the inflation rate in the sector is at a record high and is expected to rise further. 

US PMIs are expected to improve

Meanwhile, the recent flash PMI numbers indicate a sharp drop in business optimism, indicating a growing concern about growth prospects for the remainder of the year.

Due to lower energy prices, US PMIs are expected to be more resilient, with services PMIs expected to reach 58.9, and ISM's latest services PMI figures are expected to improve from 56.5 to 58.5.