US Dollar appreciated sharply against most of its rivals, in a mixture of risk aversion and encouraging comments from US Federal Reserve´s officials. Equities fell as Turkey jitters continued to weigh on investors’ mood. European indexes trimmed most of their losses ahead of the close, while Wall Street accelerated its slump in the final hour of trading. US Treasury yields remained under selling pressure and fell to levels previous to the Federal Reserve monetary policy decision.
In the UK, employment data weighed on Pound. The country reported that in February, the number of unemployed people increased by 86,600. The ILO Unemployment rate for the three months to January decreased to 5%, better than the expected 5.2%. Average Hourly Earnings in the same period increased by less than anticipated, with wages excluding bonus at 4.2%.
Commodity-linked currencies were the worst performers, although the CAD appreciated mid-US afternoon after the Bank of Canada hinted at tapering QE. “ As overall financial market conditions continue to improve in Canada, use of the Bank of Canada’s programs that were introduced in 2020 in response to the shock from COVID-19 to support the functioning of key Canadian financial markets, has declined significantly.” As a result, the central bank will discontinue its easing programs.
Commodities, Brent crude oil futures fell 5.5% to $61.05, renewed lockdowns in Europe weighing, copper fell 2.0%, iron ore rose 2.6% to $160.10, and gold fell 0.6%.
Overnight Currency Ranges
AUD/USD 0.7617 0.7746
EUR/USD 1.1842 1.19405
GBP/USD 1.3745 1.3863
USD/JPY 108.405 108.875
NZD/USD 0.69905 0.7165
USD/CAD 1.2519 1.2594
USD/CNH 6.5032 6.5183
AUD/JPY 83.01 84.34
AUD/NZD 1.0818 1.0937 (7 month high)
Another quieter day on the data front in Asia before attention shifts to the Northern Hemisphere. The UK composite PMI should receive a further boost in March from the government’s announced roadmap out of COVID-19 restrictions and speed of the vaccine roll-out. Despite the lockdown in England, private sector activity declined only slightly in February, with the services sector stabilising and manufacturers reporting marginal growth. Supply chain disruptions should continue to hamper exporters, a result of both COVID and Brexit-related trade frictions.
The Eurozone March composite PMI should reflect a familiar story by now – a contracting services sector is partially offset by manufacturing sector gains, led especially by German factories. Across the Eurozone, the operating environment is increasingly divergent. Germany and Portugal announced reopening plans in March, while France and Italy contemplated tougher restrictions. Slow inoculation programmes may weigh on sentiment in March. Financial markets will likely focus on the prices sub-index, with February’s survey reporting the highest growth in manufacturing input prices in almost a decade.
The strength in the US Markit manufacturing PMI is anticipated to continue in March. The regional Empire manufacturing index showed an acceleration. Together with reopening, this could lead to an acceleration in this measure vs. February. Market attention may zero in on any commentary surrounding tight supply chains and price increases in the sector.
AUD/USD was sold aggressively under 0.7620 with demand ahead of 0.7600 now in sight while offering interest has grown and shifted lower to the 0.7750 region.
Event Risk Data Today
New Zealand: Markets expect the February trade balance will rise to $180mn as imports moderate from their end-of-year peak.
Europe: March Manufacturing and Services PMIs will be released for the Euro Area, the UK and Germany. Euro Area March consumer confidence will be hampered by the underwhelming vaccine rollout and extended lockdowns (market f/c: -14.5).
US: February durable goods orders are expected to rise 0.6%, with business investment continuing to remain robust as the outlook improves. March Markit manufacturing (market f/c: 59.5) and services (market f/c: 60.1) PMIs will continue to show broad-based strength across the economy. Fed Chair Powell and Treasury Secretary Yellen will partake in their second day of joint testimony on the CARES Act, this time to the Senate Banking Committee. The FOMC’s Barkin (23:50 AEDT), Williams (04:35) and Daly (06:00) will speak.