Market Drivers February 21, 2018
EZ Flash PMI soften
UK Labor data mixed
Nikkei 0.21% Dax -0.84%
Europe and Asia:
EUR EZ Composite PMI 57.5 vs. 58.5
GBP UK Unemployment rate 4.4% vs. 4.3%
GBP UK Average Wages 2.5% vs. 2.4%
GBP UK Claimant Count -7.2K vs. 4.1K
USD Existing Home Sales 10:00
USD FOMC Minutes 14:00
It’s been a generally quiet night of trade in the FX market with dollar rally against the yen running into resistance at the 107.75 level while both EURUSD and GBPUSD drifted slightly lower following economic releases from each region.
In Europe, the flash PMI data slowed to 57.5 from 58.5 but remained well above the 50 boom/bust level. The slowdown was mainly driven by a decline in new orders which slipped to a five-month low. In addition comments from ECB member Vitas Vasiliauskas that QE should be tapered not ended abruptly, provided some support for euro shorts and the pair drifted to a low of 1.2315 but held above the 1.2300 figure so far.
Cable meanwhile broke below 1.3950 in the wake of mixed and what some viewed as soggy UK Labor data. Although average wages rose to 2.5% from 2.4% eyed and claimant count actually dropped by -7.2K, the unemployment rate rose to 4.4% from 4.3% forecast. According to ONS, “the number of unemployed people increased by 46,000 to 1.47 million in the three months to December 2017 when compared with July to September 2017. The direction of the change was consistent across all age groups, which raises a question of whether unemployment reached its minimum and will either grow or remain at a broadly stable level in 2018.”
Later today various members of the MPC including Governor Carney will testify in Parliament and any hint of dovishness on their part could send cable towards 1.3800 especially if they hint that a rate hike in May is not a done deal.
In North America today, the focus will be squarely on FOMC minutes due at 1900 GMT. Although the data may be a bit dated as happened before the recent turbulence in the markets, it may still inform the market given the recent hawkish bias from the Fed. With January’s CPI much hotter than expected and US wages growth accelerating to 2.9% the Fed has all the reasons it needs to hike rates in March. But the market will be looking for more, most notably any hints that members may be revising the dot plot upward which would be seen as very bullish for the dollar and could propel USDJPY through 108.00 by the end of the day as sentiment toward the buck continues to improve.