US consumer confidence dipped.

US consumer confidence dipped to 102.9 for February from a revised 106.0 previously and well below consensus forecasts of 108.5. There was an increase in the current condition’s component to 152.8 from 151.1, but this was offset by a sharp downgrade in the expectations component to 68.7 from 76.0 in January.

The expectations component has been below the 80 level for 11 out of the last 12 months which, according to the Conference Board, often signals a recession within the next year. Overall confidence in the labour market held firm on the month.

The Chicago PMI index dipped to 43.6 for February from 44.3 previously and the sixth successive monthly contraction while there was easing of inflation pressures.

The Richmond Fed manufacturing index retreated further to -16 for February from -11 the previous month and below expectations of -6 with a further sharp decline in new and unfilled orders. There was a marginal easing of the rate increase in prices received.

The dollar secured net gains in to the London fix on Tuesday with significant month-end demand for the US currency. This buying tended to offset earlier notable gains for European currencies against the US currency, but there was a fresh reversal on Wednesday.

Canadian GDP data was weaker than expected with a 0.1% decline for December and no growth for the fourth quarter compared with expectations of 1.5% annualised growth.

China’s PMI manufacturing index strengthened to 52.6 for February from 50.1 previously and well above consensus forecasts of 50.7 while the non-manufacturing index also strengthened to 56.3 from 54.4 in January. The Caixin manufacturing index also returned to expansion territory.

The monthly Australian inflation rate dipped to 7.4% for January from 8.4% previously and well below expectations of 8.1%. GDP data also missed expectations with 0.5% growth for the fourth quarter of 2022 compared with consensus forecasts of 0.8%.

The latest ISM manufacturing data will be released on Wednesday. The net balance of regional releases has been weaker than expected.

Consensus forecasts are for a slight recovery to 47.9 from 47.4 in January with prices data also important.

This data and the Friday release on services will have important implications for confidence in the US outlook and Fed policy.

The Euro held firm into the US open with stronger than expected French and Spanish data increasing speculation over stronger than expected Euro-Zone data. The dollar dipped after the US data releases. EUR/USD posted highs just above 1.0640 The US currency regained ground with strong buying into the London fix. EUR/USD dipped to around 1.0575 as equities also moved lower before recovering to above 1.0600 on Wednesday.

The yen remained under pressure in Europe on Tuesday amid dovish BoJ rhetoric. USD/JPY peaked around 136.90 before a sharp reversal. As US yields retreated, USD/JPY dipped sharply to lows at 135.75 before a move back above 136.00. USD/JPY settled around 136.30 on Wednesday with no sustained yen support.

The Swiss franc lost ground during the day. EUR/CHF strengthened to 0.9960 with USD/CHF recovering to 0.9420.

Sterling posted further gains ahead of Wednesday’s New York open on further trade optimism. GBP/USD hit highs just above 1.2140 before a slide to 1.2020 as the dollar recovered. GBP/USD traded around 1.2050 on Wednesday with some support from Chinese data.

Weaker than expected GDP data undermined the Canadian dollar. Commodity gains also failed to hold intra-day highs. USD/CAD posted net gains to 1.3640 before settling around 1.3620. AUD/USD settled around 0.6735 on Tuesday. The Australian dollar dipped sharply after the domestic data on Wednesday, but rallied after the Chinese data. After a slide to 0.6700, AUD/USD rebounded to 0.6750 on Chinese hopes.

Economic Calendar

10:00BOE Gov Bailey Speaks
15:00ISM Manufacturing PMI47.947.4

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