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Forex Major Currencies Outlook (Mar 8 – Mar 12)

ECB and BOC meetings coupled with inflation data from the US will mark the week ahead us.


ISM manufacturing PMI for February came in at 60.8 which is a new 3-year high. New orders, output and employment components all rose giving momentum to the manufacturing sector. On the other hand, great concern poses prices paid sub index. It rose to an astonishing 86(!) which is the highest since June of 2008. Prices paid reflects input costs, particularly commodity and energy and in combination with supplier delivery times disruptions it indicates mounting price pressures that can possibly transferred to consumers, thus raising inflation concerns. ISM services PMI came in at 55.3, down from the previous high in January of 58.7. New orders plunged but new export orders rose almost the same amount thus cancelling each other effects. Prices paid continued their rise and came in at 71.8 while employment sub index, although still in expansion, dropped from January (52.7 from 55.2). 

February NFP numbers doubled the expectations by coming in at 379k and added to USD strength. The unemployment rate ticked down to 6.2% while the participation rate stayed at 61.4%. The underemployment rate stayed unchanged at 11.1%. Fed Chairman Powell stated in the interview with Wall Street Journal that improvements in the unemployment rate alone are not enough for them to reach a state of full employment. Both Powell and Treasury Secretary Yellen have suggested that the real unemployment rate is closer to 10%. Participation rate will be given heightened importance as it is down almost 1.5% before the pandemic. Regarding the rising yields he added that the move has caught his eye but it does not warrant reaction. 

This week we will have inflation data. 

Important news for USD: 


  • CPI 


Final manufacturing PMI for February was revised higher to 57.7 on the back of small improvement in German reading and big improvement in French reading (56.1 from 55 as preliminary reported). Services and composite readings improved to 45.7 and 48.8 respectively also based on the improvement in the French reading. Preliminary inflation data for February came in in-line with expectations. Headline inflation was at 0.9% y/y while core came in at 1.1% y/y, down from 1.4% y/y in January. A drop in core reading was led by goods and services prices. Due to reopening, base effects, rising energy prices and reintroduction of German VAT we can see inflation crossing the 2% in the following months. 

This week we will have final reading of Q4 GDP as well as ECB meeting. Near-term growth forecasts may be lowered due to the prolonged lockdowns with Germany extending it until March 28. 

Important news for EUR: 


  • GDP


  • ECB Interest Rate Decision 


UK manufacturing PMI for February was revised higher to 55.1 from 54.9 as preliminary reported. Services and composite readings were revised down to 49.5 and 49.6 respectively, but well up from January readings and very close to the expansionary 50 level. Chancellor of the Exchequer Rishi Sunak extend the furlough scheme until the end of September. Employers will pay 10% of furlough scheme costs in July and 20% in August and September. Reduced VAT rate for hospitality will be extended until end of September and corporate tax rate will increase to 25% from 19% in 2023. 

This week we will have GDP data for January. 

Important news for GBP: 


  • GDP 


RBA has left the cash rate and monetary policy unchanged as expected. Cash rate is at 0.10% while yield curve control is implemented on the 3-year government bonds. Board members have noticed that recovery is well underway and is stronger than expected. The labour market remains a priority and wage growth has to be higher than it is currently. There will be no increase in the cash rate until inflation is sustainably within their 2-3% target range. Currently they think that full employment and inflation targets will not be achieved before 2024. RBA has doubled the size of its bond-buying on Monday with potential to resume that trend thus impacting yields and pushing them down to the desired levels. The decision was made to assist the smooth functioning of the market and the effect it had was to lower the AUD and helped by the raising US treasury yield it lead to the breaking of W1 trendline that was in place for almost a year. 

Official PMI data in February slowed down from January levels but they are still above the 50 level. Manufacturing came in at 50.6 vs 51.3 in January. It was helped by domestic demand as new orders category remained above the 50 level while new export orders dropped below the 50 level. Non-Manufacturing came in at 51.4 vs 52.1 as expected while composite reading printed 51.6 vs 52.8 in January. Big caveat to the reading is that Chinese New Year was in February and disruptions caused by it affected the reading. Caixin manufacturing PMI came in at 50.9, better than the official number, but still lowest reading since May of 2020. Caixin services and composite came in as expected at 51.5 and 51.7 respectively, down from January reading. It is interesting that both official and Caixin composite readings came above manufacturing and services readings. Chinese authorities surprised everyone when they set the GDP for 2021 at “above 6%” level. GDP target was not set for 2020 and many analysts are expecting China to grow north of 8% in 2021. 


Auckland, capitol of New Zealand, has entered the 7-day lockdown. This could lead to the flattening of the yield curve and overall NZD weakness. Markets are now pricing a 10bp rate hike by the end of the year. GDT auction showed GDT price index skyrocket 15% making it eighth consecutive auction of rising prices. The reading adds another concern about rising commodity prices and their impact on inflation. 


Q4 GDP came in at 9.6% q/q vs 7.3% q/q as expected thus making Canadian Q4 GDP reading the best in the G7 group of countries. December GDP reading came in at 0.1% m/m while January reading is projected to be at 0.5% m/m thus painting a bright picture for Q1 GDP. Trade balance in January came in at CAD1.41bn thus making it the first trade surplus since May 2019. Exports were up 8.1% m/m with increases in all products sectors while imports rose 0.9% m/m. 

This week we will have BOC meeting followed by employment data on Friday. No changes in rate and policy are expected at the BOC meeting, however we may see an upbeat tone from the institution. 

Important news for CAD 


  • BOC Interest Rate Decision


  • Employment Change
  • Unemployment Rate 


Final manufacturing reading for February improved to 51.4 from 50.6 as preliminary reported making it the first reading over the 50 level in over 2 years. New orders and new export orders increased while employment continued to decrease. Services and composite also improved posting 46.3 and 48.2 respectively. Q4 CAPEX data missed expectations coming in at -4.8% y/y vs -2% y/y as expected, however they showed improvement from Q3 which was at -10.6% y/y. State of emergency has been extended until March 21 which will push Q1 GDP deeper into negative territory, first after two successive quarters of positive growth. 

This week we will have final Q4 GDP reading. 

Important news for JPY: 


  • GDP 


SNB total sight deposits for the week ending February26 came in at CHF704.1bn vs CHF704.4bn the previous week. SNB has put the brakes on intervention as market forces are pushing Swissy in desired direction. Retail sales in January posted -0.5% y/y vs 5.4% y/y in December. Non-food sales were the main culprit declining -11.6% m/m indicating concerns about consumption activity. Headline inflation in February came in unchanged at -0.5% y/y while core inflation dropped to -0.3% y/y from being flat in January.

You can follow all economic events on the Economic Calendar page on our Website. MT server time is set to GMT+2 and if you need assistance converting MT server time to your local time you can use some of the online time converters such as WorldTimeBuddy.

Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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