Daily Market Pulse

February’s flash PMI figures across the globe


The greenback had a fairly poor day yesterday, losing almost 0.4% against a basket of major currencies as demand for the USD fell after Treasury yields cooled off. The USD also took a hit from a worse-than-expected Jobless report, which reported that Initial unemployment claims increased from 848,000 to 861,000 compared to analyst consensus of 765,000. Still, on the economic front, housing starts were hit by a sharp 12.2% drop in the single-family component, reversing December’s leap. The trend is still rising, lagging building permits, but starts are much more susceptible to weather effects so we’re braced for a sharp drop in February. Looking ahead, today’s calendar will be busy with February’s flash PMI figures and FOMC Member Barkin is set to make a public speech.


The single currency jumped as much as 0.45% on Thursday, helped by a weaker U.S dollar and positive consumer confidence index in the Eurozone. Consumer sentiment in the Eurozone improved slightly midway through the first quarter, though it remains below the previous peak in September, as activity was rebounding after the initial post-lockdown reopening. It is worth highlighting that European government debt continued to sell-off, with 10-year bonds yield touching its highest level since June. Looking ahead, FX markets will wait for PMI figures across Europe.


Sterling spiked on Thursday, touching near three-year highs against the greenback. The British Pound printed solid gains around 0.8% helped along by a broadly softer U.S dollar. The GBP also found support after the British government announced plans next Monday for a cautious and phased reopening of the economy as news that Covid-19 infections have fallen to a sufficiently low number. The seven-day moving average number of cases stood at 12.1K on Thursday, a level last seen in early October and 80% below the January 9 peak. Today, market participants will assess the fresh Retail Sales report, which showed that retail sales volumes, including petrol, fell by 8.2% month-to-month in January, much worse than the consensus, -3.0%. Year-over-year growth dropped to -5.9%, from 3.1%, also well below the consensus, -0.8%.


Despite weak inflation data, the Japanese yen was able to hold previous gains and make further gains (+0.16%) against the greenback, on Thursday. National CPI deflation retreated to -0.6% in January, from -1.2% in December, slightly above the consensus, -0.7%. The “Go-To Travel” scheme was suspended in January, amid fresh Covid-19 restrictions, causing the bulk of the pull-back in deflation. Earlier today, the flash Jibun Bank manufacturing PMI rose to 50.6 in February, from 49.8 in January. Despite the fresh curbs, the manufacturing sector is recovering, in sharp contrast to the services sector, where the PMI dropped further, to 45.8, from January’s 46.1. Investors will digest the fresh PMI report, as well as keeping a close eye on the U.S bond market.


Some recovery was seen on Thursday, with the Loonie gaining ground (+0.18%) against its rival U.S dollar. However, the upside move was limited after Canada’s ADP nonfarm payroll report showed that employment in the private sector decreased by 231,000 in January. It is worth noting that the December report was revised from a loss of 28,800 jobs to a gain of 338,200 jobs, therefore the current labor market situation is not as bad as the headline numbers imply. Looking ahead, retail sales data is due later today while investors will pay attention to oil prices and U.S treasury yields. 


The Mexican peso led losses across LatAm on Thursday as concerns about the economic impact of gas shortages in northern Mexico disrupted activity across the border. The MXN tumbled 0.42% against the greenback after the atypical low temperatures in Texas, caused gas supply cuts to the country, affecting the huge export manufacturing industry on both sides of the border. Still, the world's most indebted oil state-controlled company, Pemex, will receive an injection worth between US$1.3 billion and US$1.6 billion from Mexico’s government. Today, there is no material economic data to be released, the weather condition in Texas will continue to be widely monitored.


The Chinese yuan remained steady on Thursday. However, earlier today, the yuan bounced from a three-week low in the Asian trading session, underpinned by broad U.S dollar weakness. Market players expect corporate U.S dollar demand and developments in China-U.S. relations to bring some volatility to the CNY in the short term. On the economic front, current account data is expected later in the day.


Yesterday, the Brazilian real slid 0.34% against the U.S dollar, extending previous losses from the day before. Traders and investors continued to keep an eye on discussions about more spending on emergency aid for the low-income population, amid concerns about the health of public accounts. Moreover, investors are still digesting the recent “Boletim Focus”, which is a weekly survey with market participants published by Brazil’s Central Bank. The median of year-end Selic rate expectations increased 25 bps in 2021 to 3.75% and remained unchanged for 2022 and 2023: at 5.00% and 6.00%, respectively. On the Covid-19 pandemic front, so far, about 2.8% of the population has been vaccinated, well below Chile —the first in the LatAm ranking—with about 12%.


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