EUR PMI edges higher, CPI softer
GBP PMI unexpectedly surges, CBI drops
CHF SVME PMI rebounds
USD ISM manufacturing on tap
FX markets refused to budge from critical levels ahead of the release of ISM manufacturing in the US, leaving traders frustrated and anxiously awaiting the next big move amidst the recent return to volatility. Euro bounced between 1.3200 - 1.3245 throughout early European trading, with shifts in price based on greenback sentiment. The same applied to Cable price action, with the pair struggling to break out of the 1.9575 - 1.9630 range. Yen, on the other hand, fought to gain steam after USDJPY tested the 118.10 level over and over again, but never quite broke through.
Economic data didnt leave much to sway the markets in any particular direction either. Although manufacturing PMI for the Euro-zone improved slightly in February to 55.6, the figure still missed estimates of 55.7. A breakdown of the data showed a sharp rise in the output reading and a mild gain in new orders. Meanwhile, price components dropped off while employment eased back to 52.9, but still remained well above 50, thus signaling ongoing expansion. Initial estimates for Euro-zone CPI were estimated to have eased back to 1.8% in February from 1.9% the month prior, backing the price components of manufacturing PMI. Inflation remains relatively tepid amidst lower prices, but January core CPI readings have started to accelerate, signaling that second round inflation effects may be picking up. Overall, the core CPI figure keeps the European Central Bank on track to hike rates next week to 3.75%, but the moderating headline results will probably lead the central bank to pause thereafter until evidence of greater price pressures come to fruition.
In the UK, manufacturing PMI unexpectedly jumped to 55.4 from an upwardly revised 53.2. A breakdown of the report shows that output, new orders, and export orders all surged, indicating that demand for UK products is slowly building. The employment component rose as well, which is in line with improvements in the labor market over the past few months. Meanwhile, output prices rose to its highest level since the series began in November 1999, highlighting the upside risks to inflation as manufacturers raise prices amidst a tightening of spare capacity. The Swiss manufacturing sector reflected similar results with SVME PMI rising to 63.5 from 62.0. This data along with yesterday’s strong KOF leading indicator reading signal resilient domestic growth and underpins the Swiss National Banks case for a March hike to 2.25%.
The US faces another full calendar today, with personal income and the PCE deflator due out at 13:30GMT. However, the marquee event will be ISM manufacturing at 15:00GMT, but the question is: will it rebound above 50 and indicate expansion in the sector? The odds are against an improvement amidst the disappointing Chicago PMI and durable goods reports that weve seen over the past week and may give dollar bears the impetus to push EURUSD back to the 1.3260 level.