Midday brief – Market mood improves

The US dollar heads for a weekly loss as Fed members echo a more cautious tone on policy tightening. The Bank of England’s chief economist said in a speech the British economy is a bit stronger than expected, giving the sterling an upper hand amidst the economic rebound into expansionary regions in February. ECB’s Luis De Guindos pointed out that the central bank will be data-dependent after the highly-priced 50bps of March. Traders’ focus shifted to the US ISM Non-Manufacturing data and FOMC members Bowman and Bostic’s speeches in the New York session.

USDCHF scaled back by -0.53% below 0.9400 as the dollar lost ground. Fed’s Raphael Bostic commented that he would favour a slow and steady approach to tackle inflation, weighing the dollar as bets of an aggressive tightening faded. Traders look forward to the release of the ISM Non-manufacturing PMI and services PMI from the US. Bears may target 0.9340 after buyers got rejected at 0.9424 intraday resistance. A move lower may give up a 0.9200 psychological low.

EURGBP plummeted -0.29% following key economic data from both countries. In Europe, PMIs in Germany fell more than expected seeing the Composite PMI at 50.7 vs 51.1 and services PMI at 50.9 vs 51.3 expected. Producer prices in the region also fell -2.8% vs -0.3% month-on-month while the year-on-year figures dropped to 15.0% vs 17.7%. Meanwhile, in the UK, the Services PMI rose to 53.5 from 48.7 moving into expansionary levels in February as recession fears faded. The Composite PMI also moved in better regions of 53.1 from 48.5 in the prior month. The pair’s intraday high resides at 0.8874 and may seek 0.8836 on the slide.

CADJPY lost -0.22% as the Canadian dollar got pulled down by negative oil prices on Friday. The services sector in Japan improved in February as evidenced by the upbeat services PMI at 54.0 vs 53.6 surveyed. The jobs-to-applications ratio in Japan remained at 1.35 although the unemployment rate declined to 2.4% from 2.5% in January. Looking ahead, new building permits issued by the government in Canada are expected to have risen to 1.5% from -7.3% in January showing an improvement in housing demand in the country. Market participants look ahead to interest rate decisions from both countries next week. The pair trades above the 100.00 mark while a move lower may give sellers 99.50 and 99.00.

European equities gained on Friday as pre-covid optimism in China boosted sentiment. The CAC40 was up -0.51% a few ticks away from 7400, a 14-day range upper band. FTSE100 gained +0.07% although bulls are still challenged by 8000. DAX rose +0.78% from 15350 and may target 15600 near-term resistance.

US stock futures were quite positive as markets headed into the weekend. The US500 futures soared +0.39% sitting on a 3970 low and facing resistance at 4000. US30 futures were up +0.27% trading above 33000 as targets may be seen at 33200 on the rise. US100 futures gained +0.52% with a near resistance at 12200.

Elsewhere in commodities, crude oil prices fell on Friday despite possible Chinese demand recovery. China’s services activity rose in February, outweighing recession fears. The UK oil was down -0.14% below the $85.00 mark with targets above the $87.00 level. USWTI dipped by +0.10% although $80.00 may be taken in the short term.