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Trump expected to sign a fresh memorandum today that would open the door to retaliation for digital services taxes.

Silicon Valley has taken over the White House and the agenda they’re pushing is clear: Don’t get in our way, let us do what we want, where we want. If you’re an investor, that’s a powerful tailwind.

This article was written by Adam Button at www.forexlive.com.

There are a couple of notable reports on Ukraine today and both point to a near-term conclusion of the war.

The first is from Reuters, which reports that Russia could agree to using part of the $300 billion of sovereign assets frozen in Europe for reconstruction in Ukraine but will insist that part of the money is spent on the one-fifth of the country that’s controlled by Russia.

A separate report from Axios said US and Ukrainian officials negotiated “all night” into today to conclude a minerals deal in what US officials called a “make or break scenario fro the Ukrainians”. The terms of the deal are not clear.

This article was written by Adam Button at www.forexlive.com.

This week is the five-year anniversary of covid really kicking off and today Deutsche Bank looks back at the performance of a broad range of assets and how they’ve performed since. They also highlight performance since the Ukraine war, which looks like it’s winding down.

It’s no surprise that the Nasdaq is at the top of the list but that’s more of an AI story than covid or Ukraine. Italian stocks are a surprise near the top of the list followed by gold, silver and copper.

At the bottom of the list are sovereign bonds of the US, eurozone and UK. That’s worrisome but not a surprise given inflation and government spending. There will be a price to pay on that front.

“Looking forward, we wonder whether in five
years’ time we’ll look back on this coming weekend as a landmark moment in
Europe. Germany goes to the polls on Sunday and this is the standout election
of the year and one that could help shape Europe for years to come, both
positively or negatively,” writes DB.

This article was written by Adam Button at www.forexlive.com.

• Prelim December estimate was +1.6%
• November sales were +0.0%
• Retail sales ex-autos +2.7% vs +1.8% expected
• Prior ex-autos were -0.7%
• Core sales +2.5% vs -1.0% prior
• 2024 retail sales rose 1.3%
• January advanced sales -0.4%

There were early indications of a weak January number but the December number was particularly strong. That’s a good sign for the Canadian consumer but it’s somewhat tempered because there was an HST sales tax holiday in Canada in December that boosted consumption as a one-off and just expired.

USD/CAD is about 10 pips lower on the report.

This article was written by Adam Button at www.forexlive.com.

Team Canada beat the USA in overtime last night to win the 4 Nations Challenge and that’s sure put Canadians in a good mood today.

Unfortunately, it will be a short-lived buzz with the economy on uneven footing, Trump threatening tariffs (and annexation) and still plenty of winter left. USD/CAD is up 21 pips today to 1.4195.

The main data point to watch today is Canadian retail sales for December at the bottom of the hour. The consensus is for a 1.6% rise in December and +1.8% ex-autos. The boost is partly due to an HST sales tax holiday that kicked off in December and extended through mid-February.

I will also be watching the advance January number carefully on signs of a struggle in that month.

This article was written by Adam Button at www.forexlive.com.

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.