Quite a lot of good news out this morning from the European and UK Flash PMI’s.
The Eurozone data from IHS Markit Manufacturing PMI jumped to 57.7 in February, showing that the expansion is stabilising and building on January’s 54.8 reading. The data beat market expectations of a slight pull back in the PMI figure so the single currency caught a bid across the major pairs. The euro is one of the strongest currencies in this London session with the US dollar coming in the weakest currently. EURUSD cut through the 1.2100 level and could test towards the 1.2200 if the swing high from the 16th of Feb this week, does not act as too much resistance. Traders sentiment is showing that 70% of traders are bearish for the EURUSD and 87% bullish on the EURGBP.
However, the bullishness of the Australian dollar is currently the strongest currency to back and it has risen 1% against the US dollar. This may be due to the Westpac bank raising its 10-year rate forecast or it could be a resumption of the 11-month rising trend in the AUDUSD pair. The Aussie has broken out of the 2021 consolidation range and now looks likely to test the 2018 highs around the 0.8200 level assuming the US dollar continues to depreciate, and the commodity prices keep rising.
UK services PMI from the IHS/CIPS UK data rose significantly above market expectations but has still not breached the important 50 level, showing a slight contraction still in this sector. The Flash reading is a preliminary reading but does give traders and investors a heads up of what the coming final data should be, so a positive move is a move in the right direction for sure. Cable looks set to close the week very bullish and at near 3-year highs. Major support for the GBPUSD is Tuesday high around 1.3950 which was tested in the overnight session before the move higher to new week highs. Having stalled at the 1.4000 big figure, we may see more profit taking on Friday but the bullish sentiment plus momentum looks very encouraging as we approach the US session.
This afternoon we have more PMI data from the USA and Canadian retail sales plus we should keep an eye on the media reporting, as US President Biden is meeting with EU officials today. Reports are coming through that President Biden would like to work with China not go the route of trade war but that there needs to be some challenge to China’s abusive practices. China replied in kind by reportedly considered the ban on rare earth materials but that there were no plans to curb exports to the USA as of yet.
The energy sector is looking likely to continue yesterday’s move down, as US oil is currently trading nearly 2% down. In the commodity space, copper has made a further push higher nearly reaching the major $4 price level in early trading at the COMEX.