Animal Spirits Roar Like A Lion To Start The New Month

The dollar reached a new high against the Japanese yen since last August, near JPY106.75.  An option for $510 mln at JPY106.85 may be the last hurdle ahead of JPY107.00. Initial support is around JPY106.40.  The Australian dollar has stabilized after falling about 3.4% over the past two sessions. It held above $0.7700, but the bounce lost momentum around $0.7770, where options for A$2.2 bln expire today and a little above the 20-day moving average (~$0.7760). The PBOC set the dollar's reference rate at CNY6.4754, a little softer than expected. The dollar was settled around CNY6.4583 ahead of the Lunar Holiday on February 10. It is trading near CNY6.4635 now. It has moved broadly sideways so far this year.  

Europe

The eurozone manufacturing PMI was revised higher from the preliminary reading of 57.7 after January's 54.8. The final reading came in at 57.9 after Germany and France's flash readings were revised higher, and both Italy and Spain's reports were better than expected. Germany's stands at 60.7, up from 57.1 in January, and the French reading is at 56.1, not the flash's 55.0, and up from 51.6. Italy's edged above expected to stand at 56.9 from 55.1 in January. Spain remains the laggard but returned above the 50 boom/bust level to 52.9, up from 49.3. The takeaway is that the European manufacturing sector has weathered the lockdowns better than last February and March.  

Attention turns back to inflation, and the eurozone's preliminary February report is due tomorrow. Italy has already reported its figures today. Prices fell 0.2% on the month for a 1.0% year-over-year increase. In January, Italy's CPI fell by 0.9% for a 0.7% year-over-year increase. Spain's figures were reported last week, and it may be one of the few eurozone members experiencing deflation (negative CPI). Its CPI fell by 0.6% month and -0.1% year-over-year. Officials pointed to the decline in electricity prices after January's increase. Prices at hotels and restaurants rose less than last February. Germany's states are reported now and will report the national figure before European markets closed. In most of the states, the year-over-year increase is larger than in January. The national figure is expected to rise by 0.5% for a 1.6% year-over-year increase, unchanged from January.  

Like the eurozone, the UK's manufacturing PMI was revised higher from the flash report. It stands at 55.1 in February, up from the 54.9 preliminary estimates and 54.1 in January. While the manufacturing sector is proving resilient, consumer borrowing less so. Net consumer credit fell by GBP2.4 bln in January, the fifth consecutive monthly decline, and leaving it almost 9% below year-ago levels. On the other hand, mortgage lending remained strong at GBP5.2 bln, and mortgage approvals remain strong. The market may be more sensitive to house prices, and tomorrow, Nationwide's February figures are on tap. The week's highlight is the budget on Wednesday, where more economic support will be provided while at the same time plans to begin bringing fiscal policy back under control are expected to be announced. 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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