Sterling failed to capitalise on stronger than expected retail sales data.

US data releases were firm which continued to underpin dollar sentiment and expectations of global outperformance. The currency index advanced to fresh 3-year highs before a marginal retreat.

EUR/USD tested fresh 34-month lows and was held below 1.0800. Yen demand remained under pressure with USD/JPY at 112.00 and close to 10-month highs despite weaker equities.

Sterling failed to capitalise on stronger than expected retail sales data. Commodity currencies were undermined by US dollar strength and demand fears with AUD/USD at fresh 10-year lows.

According to minutes from January’s ECB meeting, data points to positive, but modest growth ahead, but additional data is needed to see if tentative signs of stabilisation provide firmer ground for optimism. Members were encouraged by the fact that headline and underlying inflation had evolved in line with projections with an upward trend in some inflation indicators.

The US Philadelphia Fed manufacturing index strengthened sharply to a 33-month high of 36.7 for February from 15.1 previously and well above consensus forecasts of 12.0. New orders strengthened to 33.6 from 16.7 and unfilled orders also returned to expansion. Employment indices were mixed while prices received increased at a slightly faster pace. Companies were also more optimistic over the 6-month outlook. Initial jobless claims increased slightly to 210,000 from 206,000.

The flash EU consumer confidence reading improved to -6.6 for February from a revised 8.1 previously, but the Euro was hampered to some extent by a political row over the EU budget. The Euro was unable to derive any support from the data.

Fed Vice-Chair Clarida stated that the US fundamentals are solid and lower trade tensions should be positive for investment.

The dollar overall maintained a strong tone on expectations that the economy would out-perform other major economies. The currency index advanced to fresh 3-year highs with the Euro testing fresh 34-month lows near 1.0780. There was little change on Friday with Euro-zone and US PMI business confidence data due during the day and the Euro below 1.0800.

The US currency maintained a strong tone in early Europe on Thursday while the yen remained under pressure on economic concerns. In this environment, the dollar continued to move sharply higher with 10-month highs above 112.20.

US data releases provided net support, but Wall Street stocks were subjected to a sharp correction around the European close. Treasuries also rallied with the 10-year yield declining to 1.52%, but the yen still struggled to secure significant support.

UK Retail sales volumes increased 0.9% for January after a revised 0.5% decline for December and above consensus forecasts of 0.7%. Underlying sales, excluding fuel, increased 1.6%, although the annual increase was held to 1.2% after the run of weak data over the second half of 2019. The CBI industrial orders index improved slightly to -18 for February from -22 the previous month, but still below the long-term average. Exports orders increased to a 6-month high and manufacturers expect output to increase slightly over the next few months, although underlying sentiment was still fragile.

Sterling only briefly strengthened following the retail sales data and lost ground during the day with markets continuing to fret over UK/EU trade tensions. The UK currency dipped to 3-month lows near 1.2850 while the Euro pushed to highs above 0.8400. There was a tentative recovery to near 1.2900 on Friday ahead of important PMI business confidence data.

Economic Calendar

08:15Markit Mfg PMI(FEB)50.751.1
08:30EUR German PMI Composite(FEB)50.851.2
08:30EUR German PMI Services(FEB)53.854.2
08:30EUR German Manufacturing PMI (M/M)(FEB)44.845.3
09:00Euro-Zone PMI Services(FEB)52.252.5
09:00Euro-Zone PMI Manufacturing(FEB)47.547.9
09:00Euro-Zone PMI Composite(FEB)5151.3
09:30GBP PMI Manufacturing-50
09:30GBP Public Sector Net Borrowing(JAN)-12.05B4.04B
09:30GBP PMI Services(FEB)-53.9
09:30USD Markit PMI Composite-53.3
10:00CPI (EU Norm) Prelim MM(JAN)0.20%0.20%
10:00CPI (EU Norm) Prelim YY(JAN)0.60%0.60%
10:00CPI (EU Norm) Final YY*(JAN)0.50%0.50%
10:00CPI (EU Norm) Final MM*(JAN)-1.70%-1.70%
10:00Euro-Zone Core CPI (Y/Y)(JAN 01)1.10%1.10%
10:00Euro-Zone CPI (Y/Y)(JAN)1.40%1.40%
10:00Euro-Zone CPI (M/M)(JAN)-1.00%0.30%
14:35FOMC Robert Kaplan Speech--
14:45USD Markit Services PMI(FEB)5353.4
14:45USD Manufacturing PMI(FEB)51.551.9
15:00USD Existing Home Sales(JAN)5.43M5.54M
15:00USD Existing Home Sales Change(FEB)-1.80%3.60%
15:15FOMC Brainard Speaks--
18:00USD Baker Hughes US Oil Count-678
18:30FOMC Member Richard Harris Clarida Speech--
18:30FOMC Member Mester Speaks--

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.