Talking Points:

  • British Pound may rebound on short-covering if PMI tops forecasts
  • US Dollar looks to ISM data to boost Fed interest rate hike outlook
  • Aussie Dollar erases post-China PMI drop on neutral RBA rhetoric

February’s UK Manufacturing PMI survey headline the economic calendar in European trading hours. A slowdown in the pace of factory-sector growth is expected, with the headline index ticking down to 52.3 from 52.9 in the prior month.

UK news-flow increasingly outperformed relative to consensus forecasts over the past month, suggests analysts are underestimating the economy’s strength and opening the door for an upside surprise. This may encourage covering of net-short British Pound exposure build up in recent months, sending prices higher.

The spotlight then turns to US ISM Manufacturing data, expected to show the pace of contraction accelerated in February (48.5 vs. 48.2 in January). A better-than-expected print in line with recent outperformance on US data may stoke Fed rate hike bets, boosting the US Dollar.

The Australian Dollar erased overnight losses after another neutral RBA monetary policy announcement. While no change in rates was expected, traders were speculating that a recent deterioration in economic metrics would spur a dovish shift in rhetoric, paving the way for easing in the months ahead.

Governor Glenn Stevens and company opted for the status quo however, judging the current setting policy as appropriate to deliver continued growth with inflation close to target. The door for easing was left open however, with Stevens saying that low inflation offers scope for rate cuts should that be appropriate.

The Aussie was on the defensive ahead of the RBA announcement after a disappointing set of Chinese PMI figures. The data set showed the manufacturing sector contracted at the fastest pace since November 2011 while services growth hit the weakest since the Great Recession trough in 2008.

What do DailyFX analysts see as the top trades for 2016? Find out here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Terms of Trade Index (QoQ) (4Q)

-2.0%

0.0%

-3.8%

22:30

AUD

AiG Perf of Mfg Index (FEB)

53.5

-

51.5

22:30

AUD

Weekly Consumer Confidence Index (FEB 28)

111.3

-

114.3

23:00

AUD

CoreLogic RP Data House Px (MoM) (FEB)

0.5%

-

0.9%

23:30

JPY

Jobless Rate (JAN)

3.2%

3.3%

3.3%

23:30

JPY

Job-To-Applicant Ratio (JAN)

1.28

1.27

1.27

23:30

JPY

Overall Household Spending (YoY) (JAN)

-3.1%

-2.7%

-4.4%

23:50

JPY

Capital Spending (YoY) (4Q)

8.5%

8.7%

11.2%

23:50

JPY

Capital Spending Ex Software (4Q)

8.9%

8.7%

11.2%

23:50

JPY

Company Profits (4Q)

-1.7%

-

9.0%

23:50

JPY

Company Sales (4Q)

-2.7%

-

0.1%

00:30

AUD

Net Exports of GDP (4Q)

0.0

0.3

1.5

00:30

AUD

BoP Current Account Balance (4Q)

-21.1B

-20.0B

-18.8B

00:30

AUD

Building Approvals (MoM) (JAN)

-7.5%

-3.0%

8.6%

00:30

AUD

Building Approvals (YoY) (JAN)

-15.5%

-8.5%

-3.3%

01:00

CNY

Manufacturing PMI (FEB)

49.0

49.4

49.4

01:00

CNY

Non-manufacturing PMI (FEB)

52.7

-

53.5

01:45

CNY

Caixin China PMI Mfg (FEB)

48.0

48.4

48.4

02:00

JPY

Nikkei Japan PMI Mfg (FEB F)

50.1

-

50.2

03:30

AUD

RBA Cash Rate Target (MAR 1)

2.00%

2.00%

2.00%

05:00

JPY

Vehicle Sales (YoY) (FEB)

-4.6%

-

0.2%

05:30

AUD

Commodity Index (AUD) (FEB)

73.2

-

72.7

05:30

AUD

Commodity Index (YoY) (FEB)

-21.6%

-

-24.8%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

08:15

CHF

Retail Sales Real (YoY) (JAN)

-

-1.6%

Low

08:30

CHF

PMI Manufacturing (FEB)

49.6

50.0

Low

08:45

EUR

Markit/ADACI Italy Manufacturing PMI (FEB)

52.3

53.2

Low

08:50

EUR

Markit France Manufacturing PMI (FEB F)

50.3

50.3

Low

08:55

EUR

German Unemployment Change (000's) (FEB)

-10k

-20k

Medium

08:55

EUR

German Unemployment Claims Rate SA (FEB)

6.2%

6.2%

Medium

08:55

EUR

Markit/BME Germany Manufacturing PMI (FEB F)

50.2

50.2

Medium

09:00

EUR

Markit Eurozone Manufacturing PMI (FEB F)

51.0

51.0

Medium

09:30

GBP

Markit UK PMI Manufacturing SA (FEB)

52.3

52.9

High

10:00

EUR

Eurozone Unemployment Rate (JAN)

10.4%

10.4%

Medium

10:00

EUR

Italian GDP Annual (YoY) (2015)

0.6%

-0.4%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0690

1.0794

1.0834

1.0898

1.0938

1.1002

1.1106

GBP/USD

1.3680

1.3790

1.3853

1.3900

1.3963

1.4010

1.4120

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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