UK PMI manufacturing rose to 54.9 in February, a 2-month high and the services sector index hit a 4-month high of 49.7 with both data sets above forecasts. The manufacturing sector is still suffering difficulty from lengthening delivery times due to serious supply-side constraints caused by trade difficulties with the EU. UK CBI industrial trends recovered to -24 in February, up from -38 in January and beating forecasts of -35 but exports fell again for the month as underlying confidence remained weak.
The Bank of England’s Gertan Vlieghe, an external monetary policy committee member, stated that there would be no need for further monetary stimulus if the economy evolves as the bank predicts in their February projections. Vlieghe added that the risks are skewed towards the downside however and that negative interest rates could come back into discussion later this year or into next year. Sterling broke through the 1.4000 level against the Dollar for the first time since April 2018. Futures market data revealed a slight increase bets on Sterling rising
This morning, optimism over economic re-opening and firm global risk appetite continue to support the Pound as it opens just below 1.4000 against the Dollar and near 1.1547 against the Euro.
The US PMI manufacturing index edged lower to 58.5 for February from 59.2 previously and in line with market expectations. The services index strengthened to 58.9 from 58.3, the highest reading for close to 6 years and above expectations. The dollar attempted to recover after the data, but struggled to make significant headway.
The Federal Reserve (Fed) released its semi-annual monetary report ahead of Chair Powell’s testimony to Congress this week. There was no indication in the text that Powell will deviate from his dovish stance, especially with comments that inflation expectations were little changed. New York Fed President Williams stated that the economy is still in a deep hole and the increase in yields is not a concern. He was also not concerned that the proposed fiscal stimulus will be too large.
The German manufacturing PMI index strengthened to a 3 year high of 60.6 for February from 57.1 previously and well above consensus forecasts. There was, however, a further downturn in the services sector and for the Euro-zone as a whole as the manufacturing index edged higher to 54.9 from 54.1 while the services sector declined slightly to 44.7 from 45.4. The data overall provided a Euro lift as lifted the single currency to a high of 1.2145 before settling just above the 1.21 area at the European close.
As of writing, the Euro currently trades around the 1.2115 mark against its US counterpart.
Data to watch
04:00 - EUR - German ifo Business Climate
Posted in Daily Market News on Feb 22 2021