Dollar looks to NonFarm payrolls to reverse the tide
The Nationwide house-price index rose 0.6% in January, with annual growth at 3.2% from 2.6% in December. January’s manufacturing PMI declined to 55.3 for January from a revised 56.2. The failed to meet consensus expectations of 56.5 and printed a seven-month low, although still well above the long-term average. Domestic orders slowed but this was offset by strong export demand. Input prices rose sharply, the fastest rate for 11 months, and selling prices also increased strongly which fuelled inflation fears.
Tensions between the UK and EU over EU citizens’ rights limited the Pound slightly. Reports that the UK is considering an EU customs union deal for goods could stoke Eurosceptic opposition and potentially destabilise the government further down the line.
From highs around 1.4275, Sterling dropped 0.5% to near 1.4200 before pushing back above 1.4250 as the Dollar moved sharply lower while the Euro pushed to 1.1400 from lows below 1.1470.
ISM manufacturing index decreased slightly to 59.1 for January from 59.3 previously but posted a lower drop than consensus forecasts. The prices index posted its strongest reading since June 2011 with 72.7 and both new orders and production continued well above the 60.0 mark. Supplier deliveries continue to tighten. Finally, US jobless claims dropped marginally to 230,000 in the latest week while unit labour costs rose 2.0% for Q4.
The Greenback was unable to gain support following the data releases and hawkish Federal Reserve comments Wednesday, continuing the trend of a weak trading stance despite underlying positivity. In fact, the Dollar came under pressure late in the European session as global bond yields moved higher. The 1.2500 mark was breached for the first time since 2014 and the trading session closed at 1.2512.
Today, being the first Friday of the month, the focus is on US Payrolls. Net job growth is forecast at 180,000 with unemployment expected to be unchanged at 4.1%.
Eurozone manufacturing PMI’s printed at 59.6 for January and close to record highs. Orders continued to rise strongly and output prices increased at the fastest pace for over six years. There was a strong reading for the Italian PMI index which helped trigger a fresh narrowing of peripheral bond yield spreads and provided net Euro support.
European Central Bank (ECB) council member Walter Nowotny stated that the central bank should end the asset-purchase programme now, triggering a Euro surge. With the Dollar remaining under pressure there was a fresh Euro break above 1.2500 despite higher bond yields.
Data to Watch:
09:30 GBP PMI Construction (Jan)
10:00 EUR Producer Price Index (YoY) (Dec)
13:30 USD Labor Force Participation Rate (Jan)
13:30 USD Unemployment Rate (Jan)
13:30 USD Average Weekly Hours (Jan)
13:30 USD Average Hourly Earnings (YoY) (Jan)
13:30 USD Nonfarm Payrolls (Jan)
18:00 USD Baker Hughes US Oil Rig Count
18:30 USD FOMC Member Kaplan Speech
20:30 USD FOMC Member Williams speech