Sterling drives higher
Quote of the day: “Don’t give up, the beginning is always the hardest!”
March 1st: Highlights
- RBA hold rates at 2%
- UK Manufacturing PMI – 50.8
- GBP drives up from 7-yr low
- Eurozone Unemployment Rate – 10.3%
- EUR softens with increase risk aversion
- US ISM Manufacturing PMI later
- Dollar holds firm
- JPY supported by safe haven flows
UK PMI manufacturing data missed forecasts at 50.8 (down from 52.9 in Feb). Despite the disappointment, Sterling has held up since the release, and shaking off the expectation for this to add more pressure on the Pound as it adds to the case for interest rates to remain on hold, has driven higher this morning.
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The USD has held firm, despite increasing risk aversion, which usually leads to safe haven flows. We have seen the JPY benefit here, whilst the Euro weakened on the safe haven move, losing 0.7% against USD and 1.2% against GBP. For the Euro, the main event remains as the ECB meeting, with an increasing expectation that Mario Draghi will announce an extension to the QE program.
Looking at the data, we saw the US Chicago PMI index fell more than expected, confirming that business activity contracted in February. US employment data is the main focus this week, with ADP figures to be released on Wednesday and the main event, the Non-Farm Payrolls, due on Friday. Current expectations are for a rise in the number of jobs created in Feb, which should be positive for USD. Continued USD strength, against a backdrop of unimpressive US data, presents a quandary for the Fed and the timing of the next interest rate is becoming more uncertain.
Overnight, the RBA kept their rates unchanged at 2%, which was largely expected. The statement confirmed their view that low inflation would provide room for easing, but that there are reasonable prospects for growth, with low rates supporting demand.
UN Security Council plans to pass measures to expand sanctions on North Korea.
Have a great day!
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