Global covid cases up, UK vaccine doses up
UK manufacturing PMI’s, a survey of private companies’ new orders, output, employment, suppliers’ delivery times and stocks of purchases, was revised upward to 55.1 from the preliminary reading of 54.9. A number above 50 indicates growth or positivity. UK Mortgage approvals fell to 99,000 in January, slightly down on December’s upwardly revised 102,800, but still beating forecasts of 96,000. Mortgage lending remained firm but consumer credit and overall consumer lending (an economic health indicator) dropped to £2.8bn, down from £4.5bn previously. Consumer credit shrank by 8.9% on an annualised basis and registered a record low. Dave Ramsden, Bank of England Deputy Governor, stated that the central bank wants to keep negative interest rates in the back pocket in case the economic recovery does;lt pan out as expected. For the foreign exchange markets the mere mention of moving interest rates, now or in the future can directly affect prices.
The Pound felt some benefit from the recovery in equity markets and optimism for the UK vaccine programme progress continues. Sterling failed to break through 1.4000 against the Dollar before dipping to to lows near 1.3900. The Euro settled edged higher to 1.1560 from lows near 1.1600.
Sterling opens this morning at 1.3880 to the Dollar on Tuesday with the Euro unchanged at 1.1560.
There was a marginal revision for the US PMI index to 58.6 from the flash reading of 58.5. The ISM manufacturing index strengthened to 60.8 for February from 58.7 previously and comfortably above market expectations of 58.8.
There was stronger growth in new orders and production growth while employment increased at a faster pace. There was a further increase in the prices index to 86.0 from 86.1 previously and the highest reading since May 2008 which will maintain underlying concerns over increased inflation pressures. The data overall provided support for the US currency amid expectations of US out-performance.
Richmond Federal Reserve (Fed) Barkin commented that higher bond yields were a reflection of hopes for a recovery and vaccine optimism with Treasuries dipping lower following the comments. San Francisco head Daly was more dovish with comments that the central bank must ensure that no one is left behind in the recovery. Nevertheless, there were expectations that the Fed would tolerate higher yields which continued to underpin the US dollar.
The final Euro-zone PMI manufacturing index was revised slightly to 57.9 from the flash reading of 57.7 which provided an element of Euro support. German consumer prices also increased 0.7% for February with the year-on-year rate at 1.3% from 1.0% and above expectations of 1.2%. The data maintained reservations over the potential for increased inflation pressures within Germany and the Euro-zone.
Dovish comments coming out from the ECB, with council member Villeroy stating that the recent increase in bond yields is unwarranted and that the central bank must react against it. The remarks sparked speculation over a slightly more pessimistic rhetoric and possible action at next week’s policy meeting.
As of writing, the Euro currently trades just over the 1.20 mark against its US counterpart.
Data to watch
10.00 EUR – Consumer Price Index