UK Credit Demand Remains Buoyant
Today’s data has shown that manufacturing PMI in the UK moved further into expansion, easing concerns over weak inflation. Additionally, data revealed that consumers in Britain took more credit and UK banks approved more mortgages for January, offering evidence of improving appetite among domestic consumers, especially with growth in wage earnings remaining robust.
Across the Atlantic, the ISM manufacturing PMI report for February will attract considerable attention among investors in the latter half of today’s trading session. In the Euro zone, market participants will keep tabs on today’s preliminary consumer price inflation data for February, particularly after German inflation numbers surpassed market expectations last week.
Pound Sterling – UK Markets
The just out Markit report has revealed that manufacturing PMI in the UK edged up for February, boosting expectations that activity in the industrial sector continues to remain buoyant despite muted inflation. Market participants will now be focused on the upcoming construction and services PMI readings scheduled later this week to better gauge the health of the British economy last month. Separately, another print revealed that demand for credit among UK consumers strengthened and UK banks approved more mortgages for January. Considering that spending appetite among domestic consumers has remained supported by a robust growth in wage earnings, a pickup in Britain’s lending growth was no major surprise to investors.
The Pound is trading on a weaker footing against the majors this morning. February’s Nationwide survey released earlier today indicated that house prices in the UK dropped unexpectedly for the first time in five months. However, the survey revealed that activity in Britain’s housing market is likely to pick-up going forward, especially considering the improving wages and cheap mortgage rates in the nation.
US Dollar – US Markets
The greenback traded higher against the Euro on Friday, amid better than expected US economic growth. Friday’s data showed that while fourth quarter economic growth in the US was revised downwards, the reduction was smaller than market forecasts. Another positive was the better than expected reading of Reuters/ Michigan consumer sentiment for February, though the reading dropped from the prior month. The US is a consumption led economy and the release supported sentiment about strengthening economic recovery in the nation led by consumer spending. However, a lower than anticipated growth in pending home sales raised concerns about the health of the housing market in the country.
The US Dollar is trading higher against most of its major counterparts this morning, ahead of the ISM manufacturing PMI reading for February, scheduled later today. Meanwhile, investors will keep an eye on the personal consumption and income prints for January today to gauge trends in consumer spending.
Euro – European Markets
The Euro is trading close to its recent lows this morning, around the 1.12 mark against the greenback. Among noteworthy economic releases today, German manufacturing sector activity expanded more higher than the preliminary reading, while the French contracted more than the preliminary reading, during February. The broader Euro zone manufacturing activity expanded just below the preliminary estimate. Among other key economic releases during the day ahead, market participants expect to see an upside in flash consumer price index in the Euro zone for February with oil prices having stabilised. Moreover, economic data from the previous week had shown that consumer prices in Germany climbed for February.
Earlier last week, the ECB President, Mario Draghi, had stated that he sees signs of confidence in the economy with the central bank’s recent initiatives starting to have a positive impact. Focus now shifts to this week’s ECB policy meeting for further details about the central bank’s plan to boost its balance sheet. The Euro lost ground against its peers on Friday, ahead of the ECB’s launch of its asset purchase programme.
Other Currencies – Highlights
The New Zealand Dollar is trading on a weaker footing against the greenback this morning. Data released over the weekend showed that the terms of trade balance index declined again in the fourth quarter, but less than market expectations. Export prices were down during the period, largely driven by a slump in dairy prices. However, tomorrow’s GDT price index is anticipated to show an upward trend as global diary prices have risen at the start of the year amid supply constraints due to drought conditions in New Zealand. Meanwhile, data released in China showed that factory activity continued to contract for a second straight month in February.
The New Zealand Dollar edged higher against the US Dollar on Friday. According to the ANZ survey, optimism in New Zealand’s business activity improved for February. The survey showed that rising diary prices have created a positive sentiment for the agriculture sector and low interest rates have stoked hopes of hiring and investments in the nation.