What’s been happening?

Pound Sterling – UK Markets 

Following the three-day-long rally, the British pound staged a technical correction on the last day of the month and suffered modest losses against both the euro and the dollar. The GfK on Thursday reported that consumer confidence improved slightly in the UK in February. “Despite a slowdown in overall growth and concerns about the impact of Brexit uncertainty on the UK economy, topline consumer confidence is stable again this month,” Joe Staton, Client Strategy Director at GfK, said. "Although bumping along in negative territory, the Overall Index Score is not showing any sign of making the dramatic drop seen after the June 2016 Brexit Referendum or in the early days of the last financial downturn.”

On Brexit related headlines, British Brexit Secretary Stephen Barclay told reporters that there was no consensus in Parliament about a second referendum. Later in the day, the European Union's Chief Brexit negotiator, Michel Barnier, stated that an extension of Brexit negotiation period was possible. “An extension must be not to delay the problem but solve the problem in the House of Commons,” Barnier explained.

US Dollar – US Markets

Supported by the upbeat macroeconomic data releases and the ongoing rally in the Treasury bond yields, the greenback gathered strength against its and the US Dollar Index posted gains for the second straight day on Thursday. 

On Thursday, the U.S. Bureau of Economic Analysis in its initial estimate said that the real GDP in the fourth quarter is seen expanding by 2.6% compared to analysts’ estimate of 2.3%. Underlying details of the publication revealed that the personal consumption expenditure (PCE) in Q4 rose 1.7% on a quarterly basis to surpass the market expectation of 1.6%. “The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending,” the BEA explained. Other data on Thursday showed that the ISM-Chicago’s PMI rose to its highest level in 14 months at 64.7 in February from 56.7 in January. 

Commenting on the yield curve later in the day, “Inverted 2-year, 5-year treasury spread is a cautionary signal that tells you markets are sceptical,” Dallas Fed President Robert Kaplan said and added that the yield curve was suggesting that the future growth prospects were ‘sluggish.’

Euro – European Markets

The shared currency closed the day modestly lower vs the greenback and recovered a small portion of this week’s losses against the pound sterling. Germany’s Destatis on Thursday reported that inflation, as measured by the Consumer Price Index (CPI), rose 1.6% on a yearly basis in February to come in above the market expectation of 1.5%. Other data from Germany revealed that the import price index declined by 0.2% on a monthly basis in January.

What’s coming up? 

UK: The Bank of England will release net lending to individuals, consumer credit, and mortgage approvals data on Friday. The IHS Markit will publish February’s final Manufacturing PMI report.

US: Core PCE Price Index, the Fed’s preferred gauge of inflation, personal income, and personal spending data will be featured in the U.S. economic docket alongside with the IHS Markit and the ISM’s Manufacturing PMI reports and the UoM’s Consumer Sentiment Index. 

EU: The IHS Markit will release the Manufacturing PMI figures for the euro area and Germany on Friday. The Eurostat will publish the unemployment rate, which is expected to stay unchanged at 7.9%, as well.