Articles

Headlines:

• Dollar holds steadier so far on the session
• France February flash services PMI 44.5 vs 48.9 expected
• Germany February flash manufacturing PMI 46.1 vs 45.5 expected
• Eurozone February flash services PMI 50.7 vs 51.5 expected
• UK February flash services PMI 51.1 vs 50.8 expected
• UK January retail sales +1.7% vs +0.3% m/m expected
• France February business confidence 96 vs 95 prior
• Italy January final CPI +1.5% vs +1.5% y/y prelim
• Russia says no interim contact expected before Trump-Putin meeting
• China says vice premier He set to have video call with US Treasury secretary Bessent

Markets:

• USD leads, JPY lags on the day
• European equities higher; S&P 500 futures flat
• US 10-year yields down 1.5 bps to 4.483%
• Gold down 0.2% to $2,932.89
• WTI crude down 0.8% to $71.94
• Bitcoin up 0.7% to $98,790

As we look towards the end of the week, the dollar is recovering some ground with the help of other forces in play today.

USD/JPY is the lead gainer, up 0.5% to above 150.00 again after BOJ governor Ueda warned against “abnormal” moves in the Japanese bond market. That saw 10-year JGB yields fall and USD/JPY got a kick up from it, rising in Asia to hold above the figure level around 150.30-50 in European trading.

During the session, we got a very weak French PMI reading and that dragged the euro slightly lower with EUR/USD pushed down from around 1.0480 to 1.0460 levels. So far, the pair is still struggling to find a way past the 1.0500 mark on a firmer basis for the last few weeks.

A stronger UK retail sales report did briefly keep sterling afloat, with GBP/USD seen around 1.2670 early on before easing to around 1.2640 as the dollar is holding its own. As for commodity currencies, they are lightly changed with USD/CAD up just 0.1% to 1.4190 levels ahead of the Canada retail sales data later and AUD/USD is down just a touch to 0.6385.

In terms of risk sentiment, it wasn’t so much of a factor. S&P 500 futures are flattish with tech shares up but value shares are down. Nasdaq futures are up 0.3% but Dow futures are down 0.3%, so that’s the state of play ahead of the open later.

European stocks though are hoping to try and salvage their winning streak, keeping a little higher on the day. The DAX still needs to do more to claw back weekly losses, so all eyes will be on the mood in Wall Street to determine that.

As we look to wrap up the week, US PMI data will be in focus alongside more headlines from Trump himself surely. So, do be on the lookout for that before the weekend comes along. Have a good one, folks!

This article was written by Justin Low at www.forexlive.com.

Russia says that “there are no specifics yet” on a possible Trump-Putin meeting, so it might even take place after next week. However, they note that both Trump and Putin are keen to talk in person. From the Kremlin:

“There is a desire of the two presidents, which they expressed, and there is also an instruction to prepare this meeting well so that it will be as productive as possible. It is during the preparation that all the nuances will be discussed.”

This article was written by Justin Low at www.forexlive.com.

The dollar is keeping a little higher on the day but we’re still yet to get to the US PMI data later. So far, a slightly weaker French PMI data is weighing on the euro a bit while the yen is down after BOJ governor Ueda warned against “abnormal” moves in the Japanese bond market. Besides that, the overall market mood is fairly mixed as we look to the closing stages this week.

At the balance, the dollar is just a little on the softer side this week with EUR/USD backing off after another test of 1.0500 earlier in the day:

As for USD/JPY, the pair looked like it was bound for a firmer breakdown below 150.00 but is now driven back up. The low very early in the day touched 149.27, just shy of the 50.0 Fib retracement level of the swing higher since September of 149.22. But at the weekly close, it’s all about reaffirming whether or not there will be a break of the figure level. So, there’s that to work through later.

Besides that, GBP/USD is down 0.2% to 1.2647 currently even after a stronger UK retail sales report. The data might’ve surprised to the upside but it’s hardly reinvigorating when it followed from a rather disappointing stretch in Q4 last year.

Looking to commodity currencies, USD/CAD is marginally higher by 0.1% to 1.4193 while AUD/USD is down just a touch by 0.2% to 0.6385 currently.

Here are the weekly changes relative to the dollar as the benchmark:

• EUR -0.2%
• JPY +1.2%
• GBP +0.5%
• CHF flat
• CAD -0.1%
• AUD +0.6%
• NZD +0.5%

This article was written by Justin Low at www.forexlive.com.

• Services PMI 51.1 vs 50.8 expected vs. 50.8 prior
• Manufacturing PMI 46.4 vs 48.4 expected vs. 48.3
  prior
• Composite PMI 50.5 vs 50.5 expected and 50.6 prior.

Key findings:

• Flash UK PMI Composite Output Index: 50.5 (Jan: 50.6).
  2-month low.
• Flash UK Services PMI Business Activity Index: 51.1
  (Jan: 50.8). 2-month high.
• Flash UK Manufacturing Output Index: 47.4 (Jan: 49.2).
  2-month low.
• Flash UK Manufacturing PMI: 46.4 (Jan: 48.3). 14-
  month low

Comment:

Commenting on the flash PMI data, Chris Williamson,
Chief Business Economist at S&P Global Market
Intelligence said:

“Early PMI survey data for February indicate that
business activity remained largely stalled for a fourth
successive month, with job losses mounting amid falling
sales and rising costs.

“The lack of growth alongside rising price pressures
points to a stagflationary environment which will present
a growing dilemma for the Bank of England.

“While marginal output growth was eked out in February,
order books deteriorated at a rate not seen since August
2023 to hint at likely cuts to business activity in the
coming months unless demand revives.

“Firms’ costs are meanwhile rising at a rate not
witnessed since May 2023, the rate of inflation having
now accelerated for four straight months, putting further
upward pressure on selling prices for both goods and
services. The survey data point to a further rise in
inflation beyond the latest uptick to 3%.

“A key factor behind the upturn in inflationary pressures
is the growing number of firms reporting the need to
raise prices in order to help offset the impending rise in
staff costs associated with the National insurance hike
and uplift to the minimum wage announced in the
autumn Budget.

“However, companies also reported that the Budget
changes also played a major role in driving intensifying
job cuts. Employment fell sharply again in February,
dropping at a rate not seen since the global financial
crisis if pandemic months are excluded. One in three
companies reporting lower staffing levels directly linked
the reduction to policies announced in last October’s
Budget.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prio +1.3%
• HICP +1.7% vs +1.7% y/y prelim
• Prior +1.4%

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 51.3
• Manufacturing PMI 47.3 vs 47.0 expected
• Prior 46.6
• Composite PMI 50.2 vs 50.5 expected
• Prior 50.2

Despite a poor set of readings from France, the euro area economy managed to grow marginally in February. A rebound in the manufacturing sector helped, as services activity slumped to a three-month low. Demand conditions remain muted as new orders fell once more and firms are again seen cutting staffing levels on the month. Besides that, business confidence also eased to a three-month low. Adding to some slight concern for the ECB is that f input cost inflation quickened to the fastest in almost two years, with output prices rising at a
sharper pace as a result. HCOB notes that:

“With just two weeks to go before the ECB meeting, the price front is sending bad news. The HCOB PMI price indices for the
services sector have risen or remained at a high level. The statements by the ECB President can be interpreted as meaning
that inflation can only be considered defeated once the services inflation is under control. The HCOB PMI shows that this is
definitely not the case. This is partly due to the fact that wage settlements continue to be above average. Interestingly, it can
also be observed that input prices for goods are now rising more sharply. These depend, among other things, on energy
prices and, in this context, Isabel Schnabel pointed to the uncertainty, and strongly recommended discussing a pause on
interest rates at the next rate-setting meeting.

“The services sector is showing renewed signs of weakness. After two months of moderate but still visible growth, the rate of
expansion has now weakened considerably. This is accompanied by a decline in new orders and an accelerated decline in
order backlogs. France is the driving force behind the slowdown in activity in the services sector, where the decline in
business activity that has been ongoing since September has accelerated significantly. By contrast, Germany has more or
less maintained its modest rate of expansion. Assuming that the political situation has an impact on the performance of the
services sector, it can be seen that expectations of a more stable political situation in the future are greater in Germany,
where federal elections are on the horizon, than in France, where snap elections could be called at any time from June
onwards.

“Economic output in the eurozone is barely moving at all. The somewhat milder recession in the manufacturing sector is only
just being overcompensated for by the barely noticeable growth in the services sector. There is certainly hope for a German
government that will be able to act after the elections, which should also provide a positive impetus for the eurozone as a
whole. However, this is offset by a relatively unstable situation in France and a US customs policy that is spreading
uncertainty. These figures therefore do not yet point to a recovery in the eurozone.”

This article was written by Justin Low at www.forexlive.com.

• Manufacturing PMI 46.1 vs 45.5 expected vs. 45.0 prior
• Services PMI 52.2 vs 52.5 expected vs. 52.5 prior
• Composite PMI 51.0 vs 50.8 expected and 50.5 prior

Key findings:

• HCOB Flash Germany Composite PMI Output Index(1) at 51.0 (Jan: 50.5). 9-month high.
• HCOB Flash Germany Services PMI Business Activity Index(2) at 52.2 (Jan: 52.5). 2-month low.
• HCOB Flash Germany Manufacturing PMI Output Index(4) at 48.5 (Jan: 46.3). 9-month high.
• HCOB Flash Germany Manufacturing PMI(3) at 46.1 (Jan: 45.0). 24-month high.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The manufacturing sector is still struggling, but things are looking up. The recession has been easing for two months now,
and the output index is getting closer to the expansionary threshold of 50. This improvement is thanks to a slowdown in the
drop of new orders, including those from abroad. However, it’s too soon to celebrate just yet, as the manufacturing sector is
most likely to face challenges from US tariffs in the coming months.

“The service sector has been growing steadily for three months. Fears that it would be dragged down by the manufacturing
recession haven’t come true so far. This is partly because the downturn in manufacturing has eased up a bit. Plus, services
are benefiting from an increase in private consumption, which has been growing at a good pace.

“The strength of the service sector is evident in companies’ ability to raise prices at a similar robust pace as before. That
doesn’t necessarily mean their profit margins are improving, as costs are still rising significantly due to high wage
agreements and other factors. But the fact that they can maintain their pricing power is a sign of resilience.

“Overall, the economy seems to be back on a growth path, at least for the first two months of the year. According to our GDP
Nowcast, which takes the PMI and other data into account, the drag on growth from manufacturing is getting smaller, and
the growth in services is making up for it. Looking ahead, much of the mood will depend on the capability of the new to be
elected government to signal stability and to take bold measures.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 48.2
• Manufacturing PMI 45.5 vs 45.5 expected
• Prior 45.0
• Composite PMI 44.5 vs 48.0 expected
• Prior 47.6

That’s a real awful set of readings with both the services and composite ones being 17-month lows. It reaffirms that the French economy is sliding deeper into contraction territory at the start of this year as weaker demand conditions continue to be the main drag. Meanwhile, employment conditions also suffered as firms reduced workforce numbers by the most since August 2020. Ouch. HCOB notes that:

“Recession with no end in sight. The HCOB French Flash PMI in February failed to provide any relief, with the headline
Composite Output Index plunging over three points to signal its deepest contraction since September 2023. Surprisingly, it
was the services sector, not the manufacturing sector, that caused the latest decline. This fresh setback for the French
economy perhaps comes as a surprise, given the recent allaying of some political uncertainty in the country. Prime Minister
Francois Bayrou managed to pass the 2025 budget by bypassing Parliament with Article 49.3 and survived a no-confidence
vote. However, the economy seems to view Bayrou’s achievement more as a temporary success rather than long-term
stability, as he still lacks a majority in Parliament and could be ousted by the opposition at any time.

“The services sector is a cause for concern, with a significant downturn in activity compared to the previous month. The
HCOB data presents a very weakened picture of the sector at the start of 2025. Order intakes are shrinking at a rapid pace
and future activity expectations remain well below the historical average. In this situation, new hires are hardly possible, and
we saw substantial layoffs in February.

“The manufacturing sector showed small signs of underlying improvement. The HCOB Flash PMI for manufacturing rose
slightly in January but remains in contraction territory. Demand remains weak, although new orders shrank more slowly than
in the previous month. Overall, there is little hope to be drawn from the slightly improved index figures, as the outlook for
output is still viewed pessimistically and layoffs are commonplace. The sector’s woes are exacerbated by faster increases in
input prices.”

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.1%
• Germany DAX -0.1%
• France CAC 40 +0.2%
• UK FTSE flat
• Spain IBEX -0.1%
• Italy FTSE MIB +0.3%

Generally speaking, the winning streak is under threat after the declines in the past two days. The DAX and CAC 40 are still down on the week but the IBEX is flattish and FTSE MIB sitting higher. The IBEX itself is looking for nine straight weeks of gains while the FTSE MIB is searching for a sixth weekly gain in seven. For now though, the overall mood is more tentative for today. US futures are also flat as all eyes are on PMI data to see what that has to offer to the equation.

This article was written by Justin Low at www.forexlive.com.

• Prior 95
• Manufacturing confidence 97
• Prior 95; revised to 96
• Services confidence 98
• Prior 96

The French business climate improved slightly in February, owing to a bounce in both industry and services morale. However, employment conditions worsened with the indicator there falling to 94 from 98 previously. That’s the lowest reading since April 2021 and if you scrap out the Covid pandemic as an outlier, it’s the weakest reading since March 2015. That is something to be wary about when looking at the future reports in the months ahead.

This article was written by Justin Low at www.forexlive.com.

The call is said to “communicate issues in the economic field” between both countries. There’s no details on when that call will take place but it is something that we might expect some headlines from either over the weekend or next week perhaps.

This article was written by Justin Low at www.forexlive.com.

• Prior -0.3%; revised to -0.6%
• Retail sales +1.0% vs +0.6% y/y expected
• Prior +3.6%; revised to +2.8%
• Retail sales ex autos, fuel +2.1% vs +0.9% m/m expected
• Prior -0.6%; revised to -0.9%
• Retail sales ex autos, fuel +1.2% vs +0.5% y/y expected
• Prior +2.9%; revised to +2.1%

As seen above, the jump on the month was largely driven by food store sales (+5.6%) – which was the largest rise since March 2020. That said, it follows from four straight months of declines previously. So, that puts into perspective the backdrop coming into this month’s report as sales were poor during the final quarter of last year.

Non-store retailers’ sales volumes also increased modestly with retailers in this sector noting that post-Christmas sales are remaining strong. Besides that, all other sectors reported declines on the month with department stores’ sales coming in flat.

As a whole, UK retail sales volumes are still down 1.3% compared with the pre-pandemic level of February 2020.

This article was written by Justin Low at www.forexlive.com.