German Ifo Business Sentiment Weakens in February
The key economic data for the day was the German Ifo survey that tracked the sentiment in the German business sector. Data showed that the Ifo business climate sentiment declined to the lowest level since February 2015, while the sub-component current assessment index unexpectedly rose in February. Another closely watched publication was Germany's GDP which indicated that the German economy expanded in line with market expectations in the last quarter of the previous year.
In the US, consumer confidence data along with S&P/Case-Shiller Home Price Indices and existing home sales data are scheduled for release later today.
Pound Sterling – UK Markets
The Pound traded lower against the US Dollar and the Euro yesterday, hitting a six-year low against the greenback, amid escalating worries over the possible exit of Britain from the European Union in the referendum scheduled for 23 June 2016. In the UK, the Confederation of British Industry’s survey of 497 manufacturers indicated that the index fell unexpectedly in February, extending its fall to a tenth consecutive month. However, the index remained near its average level, as the total order books remained steady while export orders slightly improved over the previous month. The slowing global economy has had a significant impact on the nation’s exports.
The Pound is trading lower against the greenback this morning with no major economic releases scheduled today in the UK. Meanwhile, the looming concerns over the Brexit referendum continue to weigh on Sterling. Later in the week, domestic growth figures for the fourth quarter and housing prices data by Nationwide will be eyed by investors for further direction in trading in the Pound - US Dollar currency pair.
US Dollar – US Markets
The US Dollar traded mostly higher against its major currency counterparts yesterday, as Friday’s robust consumer inflation data continued to offer support to the US Dollar. However, gains in the currency were kept in check as preliminary reading of the Markit’s Manufacturing PMI reported a more than expected drop in February, registering the lowest level since 2012. The decline in factory output was partially attributed to a stronger greenback and waning demand amid less favourable global economic conditions. Next week’s manufacturing PMI by the Institute for Supply Management will gain significant attention of investors for further insights into the health of the US manufacturing sector.
Today, market participants will closely monitor the crucial consumer sentiment data released by the Conference Board, which is likely to show deterioration in morale in February amid financial volatility and dismal Reuters/Michigan consumer sentiment index for February. Separately, currency traders will eye the monthly update on the US housing purchases and Richmond Fed Manufacturing Index.
Euro – European Markets
The shared currency trimmed its gains against the US Dollar and the Pound this morning. The single currency is trading below the 1.10 mark against the greenback, after data revealed that the German Ifo business sentiment continued to weaken more than expected in February. Also, the Ifo expectations index which reveals firms’ projections for the next six months came in worse than expected for February. Earlier today, German growth figures for the fourth quarter were published. Data showed that the German economy expanded in line with market expectations in the last three months of the previous year, led by a surge in domestic demand and increased government spending. Meanwhile, German growth was hampered by dismal trade data for the fourth quarter.
Going forward, investors will eye consumer price inflation data in the Euro zone and Germany, along with fourth quarter growth figures for the second largest economy of the Euro zone.
Other Currencies – Highlights
The Swiss Franc is trading on a stronger footing against the US Dollar today ahead of Swiss National Bank Chairman, Thomas Jordan’s speech scheduled later in the day and as the greenback gave up some of its gains from the previous session. Jordan’s speech on the monetary policy is expected to prompt volatility in the currency pair. The risk-off environment following the recent slump in Asian equities this morning and after the People’s Bank of China slashed its daily reference rate by the maximum in six weeks boosted appeal for the safe haven Swiss Franc.
Going forward, investors will keep a tab on the UBS consumption indicator and industrial production data in Switzerland later this week. Across the Atlantic, the consumer confidence data along with housing data including S&P/Case-Shiller Home Price Indices and existing home sales data will be closely eyed by investors.