FX markets waiting for PMI data.

National Bank vice-chair Schlegel stated that the bank was still willing to intervene in currency markets if necessary.

He reiterated that there could be action to buy or sell the Swiss currency as required. Schlegel also reiterated the need to bring inflation back into the 0-2% target.

There were very narrow ranges on Monday with US markets closed for the Presidents Day holiday.

Risk conditions were slightly less confident in Asia on Tuesday with equities posting slight losses which helped underpin the dollar.

The latest government borrowing data recorded a surplus of £5.4bn for January after the substantial deficit for December, but the surplus last year was £12.5bn.

January is always a strong month due to tax receipts and there was huge spending on energy support measures with interest payments also continuing to increase.

The latest PMI business confidence data will be released on Tuesday with data from the Euro-Zone, UK and US.

Consensus forecasts are that only the Euro-Zone services sector will be in expansion territory for the month.

The relative outlook between the Euro and US will be important for underlying market sentiment.

The latest Canadian consumer prices data will be released on Tuesday.

Consensus forecasts are for the headline inflation rate to decline to 6.1% from 6.3% with the core rate edging higher to 5.5% from 5.4%.

Narrow ranges prevailed on Monday with low trading volumes. EUR/USD was unable to hold above the 1.0700 level and drifted lower. EUR/USD settled around 1.0670 on Tuesday as the dollar secured a slight advance.

The yen was also held in narrow ranges with caution ahead of testimony from Bank of Japan Governor nominee Ueda. Japan’s PMI manufacturing index dipped to the lowest level since August 2020. USD/JPY edged higher to near 134.50 on Tuesday.

The Swiss franc was underpinned by National Bank rhetoric. EUR/CHF retreated to 0.9860 with USD/CHF retreating to 0.9240.

Sterling was held in tight ranges with marginal gains. GBP/USD settled around 1.2025 with EUR/GBP edging lower to 0.8875.

Commodity currencies edged higher on hopes for a Chinese recovery, but failed to hold gains as equities lost traction. AUD/USD traded above the 0.6900 level before settling just below this level on Tuesday. USD/CAD drifted lower to 1.3450 before a net gain to 1.3480.

Economic Calendar

09:30UK Flash Manufacturing PMI47.547.0
14:45US Flash Services PMI47.346.8

*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.