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Morning All: we'll see a New Daily Forex Analysi.
EUR / USD
The Euro was unable to make any headway on Tuesday and dipped to test fresh one-month lows against the dollar with a lack of positive influences for the single currency. There was a slight upward revision to the final Euro-zone manufacturing PMI index while unemployment fell to 10.3% from 10.4%, the lowest rate since August 2011. There were some media reports that the ECB could consider a 15 basis-point cut in the deposit rate at next week’s policy meeting. There were also comments from bank President Draghi in a letter to an European Parliament member that the policy review in March will be against the background of downside risks. Overall, there were expectations of more aggressive action by the central bank which helped maintain underlying negative Euro sentiment. The US ISM manufacturing index was slightly stronger than expected at 49.5 for February from 48.2 previously. Although this was the fourth consecutive reading below the crucial 50.0 level, there was some relief that further deterioration was avoided. Most components showed some improvement and inventories fell which should help underpin future production. There was also a stronger than expected gain for construction spending for the month. The data overall bolstered optimism surrounding the US economy which helped bolster dollar support. There was a shift in Fed expectations with greater confidence that there would be further tightening this year which supported the dollar. The Euro was able to find some support below 1.0850 before showing fresh vulnerability on Wednesday as defensive demand faded.
JPY The dollar was able to hold steady around the 113.00 area ahead of the US open on Tuesday as gains in equity markets helped underpin risk appetite. The US currency pushed sharply higher after the ISM data with gains to the 114.00 are. There was a significant move higher in US yields with benchmark 10-year rates moving to four-week highs above the 1.80% level with a peak above 1.83% which provided significant US support. There were robust gains for the Australian and Canadian dollars which contributed to reduced demand for the Japanese currency on defensive grounds. Bank of Japan Governor insisted that monetary policy was working as expected and attention will switch towards the next policy meeting in the middle of March. Overall risk conditions held firm on Wednesday which curbed potential yen support and the dollar looked to break convincingly above the 114.00 resistance area in early Europe.
GBP Although Sterling was subjected to further choppy trading on Tuesday and rejected just above the significant 1.4000 resistance area, it held comfortably above recent lows with net gains. It also strengthened to highs near 0.7750 against the Euro before a partial retreat. Sterling gained from improved in global risk conditions and unwinding of over-sold conditions. The UK PMI manufacturing index was significantly weaker than expected with a decline to 34-month lows of 50.8 from 52.9 previously. There was a downturn in most sectors with domestic and export orders weak while pricing pressures remain weak, although the survey would not be able to pick up any impact the most recent Sterling weakness. PMI data will continue to be monitored closely with the construction data on Wednesday followed by the key services data on Thursday. A 2.0% decline in the BRC shop-price index maintained evidence of pricing weakness at the retail level, but Sterling was able to maintain a firmer tone as risk appetite improved and it held well above 1.4900 against the dollar.
EUR / USD
The Euro was unable to make any headway on Tuesday and dipped to test fresh one-month lows against the dollar with a lack of positive influences for the single currency. There was a slight upward revision to the final Euro-zone manufacturing PMI index while unemployment fell to 10.3% from 10.4%, the lowest rate since August 2011. There were some media reports that the ECB could consider a 15 basis-point cut in the deposit rate at next week’s policy meeting. There were also comments from bank President Draghi in a letter to an European Parliament member that the policy review in March will be against the background of downside risks. Overall, there were expectations of more aggressive action by the central bank which helped maintain underlying negative Euro sentiment. The US ISM manufacturing index was slightly stronger than expected at 49.5 for February from 48.2 previously. Although this was the fourth consecutive reading below the crucial 50.0 level, there was some relief that further deterioration was avoided. Most components showed some improvement and inventories fell which should help underpin future production. There was also a stronger than expected gain for construction spending for the month. The data overall bolstered optimism surrounding the US economy which helped bolster dollar support. There was a shift in Fed expectations with greater confidence that there would be further tightening this year which supported the dollar. The Euro was able to find some support below 1.0850 before showing fresh vulnerability on Wednesday as defensive demand faded.
JPY The dollar was able to hold steady around the 113.00 area ahead of the US open on Tuesday as gains in equity markets helped underpin risk appetite. The US currency pushed sharply higher after the ISM data with gains to the 114.00 are. There was a significant move higher in US yields with benchmark 10-year rates moving to four-week highs above the 1.80% level with a peak above 1.83% which provided significant US support. There were robust gains for the Australian and Canadian dollars which contributed to reduced demand for the Japanese currency on defensive grounds. Bank of Japan Governor insisted that monetary policy was working as expected and attention will switch towards the next policy meeting in the middle of March. Overall risk conditions held firm on Wednesday which curbed potential yen support and the dollar looked to break convincingly above the 114.00 resistance area in early Europe.
GBP Although Sterling was subjected to further choppy trading on Tuesday and rejected just above the significant 1.4000 resistance area, it held comfortably above recent lows with net gains. It also strengthened to highs near 0.7750 against the Euro before a partial retreat. Sterling gained from improved in global risk conditions and unwinding of over-sold conditions. The UK PMI manufacturing index was significantly weaker than expected with a decline to 34-month lows of 50.8 from 52.9 previously. There was a downturn in most sectors with domestic and export orders weak while pricing pressures remain weak, although the survey would not be able to pick up any impact the most recent Sterling weakness. PMI data will continue to be monitored closely with the construction data on Wednesday followed by the key services data on Thursday. A 2.0% decline in the BRC shop-price index maintained evidence of pricing weakness at the retail level, but Sterling was able to maintain a firmer tone as risk appetite improved and it held well above 1.4900 against the dollar.
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