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• 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.

The dollar fell in trading yesterday but the major currencies bloc is not showing much change so far today outside of the Japanese yen that is. USD/JPY continues to run rather volatile, now climbing back up to above 150.00 levels after the drop since US trading yesterday. The low earlier touched 149.27, just a few pips shy of the 50.0 Fib retracement level of the swing higher since September at 149.22.

All in all, the greenback remains in a vulnerable spot as we approach the closing stages on the week. That especially with EUR/USD running up against key resistance at 1.0500. That will be one to watch in the sessions ahead. The bad news for the dollar is that the fall yesterday comes despite sagging risk sentiment. It’s never a good look when that happens.

For today, PMI data will be the key economic data releases to watch. That will apply to both Europe and the US later. Any major surprises there could trigger some decent moves in the euro and/or the dollar. So, do keep an eye out for that.

0700 GMT – UK January retail sales data0745 GMT – France February business confidence0815 GMT – France February flash manufacturing, services, composite PMI0830 GMT – Germany February flash manufacturing, services, composite PMI0900 GMT – Eurozone February flash manufacturing, services, composite PMI0930 GMT – UK February flash manufacturing, services, composite PMI

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

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

• BOJ Ueda says policy still accommodative, will adjust if underlying prices rise
• OPEC+ is expected to once again postpone it production hike
• UK asset manager ABRDN in talks with China Citic to form Joint Venture
• BoJUeda says hike to 50bp interest rates will boost interest payments on reserves 1tln yen
• Japan Prime Minister Ishiba has strong concerns that rising yields may harm finances
• BOJ Governor Ueda warns loss of mkt confidence in Japan fiscal could drive JGB yields up
• USD/JPY volatility persists – it rose around 150 points from its earlier session low
• More on Japan’s finance minister warning of fiscal strain as bond yields hit 15-year high
• Japan’s Core Inflation Hits 19-Month High, Strengthening Expectations for BOJ Rate Hikes
• More from BOJ’s Ueda – Ready to respond to abnormal market moves
• Bank of Japan Governor Ueda sees the bright side of higher interest rates
• RBNZ Chief Economist Conway – OCR forecasts indicate another 75bp easing
• PBOC sets USD/ CNY reference rate for today at 7.1696 (vs. estimate at 7.2433)
• Japanese Industry and Trade Minister Muto will head to the US to talk tariffs
• Japan Jibun February preliminary manufacturing PMI 48.9 (prior 48.7)
• Chinese financial media says PBOC LPRs have room to fall further
• Japan finance minister Kato – higher long term rates can pressure Japan’s fiscal situation
• RBA Bullock says did not want to be late to easing
• Japan January Core CPI 3.2% y/y vs. 3.1% expected
• Fed’s Kugler says watching labour market layoffs like a hawk
• Reserve Bank of Australia Governor Bullock says might be more rate cuts, caution required
• Ukraine President Zelenskyy says meeting with US’ General Kellogg ‘restores hope’
• Fed’s Kugler says will have to wait to assess the inflation impact of tariffs
• RBA Gov Bullock says the Bank aiming for the mid-point of the 2-3% inflation target band
• RBA Gov Bullock wary that cutting rates too quickly could lead to inflation above midpoint
• Pimco cautious on Australia semi-govmt debt, concerns mount about states fiscal health
• FT front page headline says US opposes language on ‘Russian aggression’ in Ukraine
• Fed’s Kugler says she thinks the Fed should not cut interest rates again for some time
• Forexlive Americas FX news wrap 20 Feb. The USD moves lower. USDJPY falls to new 2025 low.
• Australian Preliminary Manufacturing PMI for February 50.6 (prior 50.2)
• Fed’s Kugler says Fed Funds rate is moderately restrictive
• New Zealand January trade balance a deficit of 486bn NZD (prior 94mn surplus)
• ICYMI former BOJ Sakurai hawkish comments: Could be a May hike, sees 1.5% by end FY 2026
• Trade ideas thread – Friday, 21 February, insightful charts, technical analysis, ideas

USD/JPY extended its decline leading into Japan’s inflation data release today, but in a surprising turn, the pair rebounded sharply despite figures that reinforced expectations of continued Bank of Japan (BOJ) rate hikes.

The inflation data showed:

• Core inflation (excluding fresh food): 3.2% y/y, a 19-month high.
• Core-core inflation (excluding food and energy): 2.5% y/y.
• Headline inflation: 4.0% y/y.

On the surface, this data supported the case for the BOJ to stay on its tightening path. However, after initially sliding, USD/JPY found a bottom and began to climb—a move that initially looked like a classic “buy the fact” reaction (a sharp sell-off ahead of the data, followed by a rebound once it was confirmed). But instead of stabilizing, the rally kept extending.

As this was unfolding, Japanese government bond (JGB) yields surged. The 10-year benchmark yield hit 1.455%, its highest level since 2009, while the 2-year yield climbed to its highest level since October 2008. These moves triggered official pushback, with policymakers attempting to talk yields down:

• Finance Minister Katsunobu Kato warned that rising bond yields could strain Japan’s finances due to increased debt-servicing costs.
• Prime Minister Shigeru Ishiba echoed similar concerns about the burden of higher yields.
• BOJ Governor Kazuo Ueda signaled potential bond market intervention, stating:
  “We will purchase government bonds nimbly to foster the stable formation of yields in exceptional cases where long-term yields rise sharply.”

Concerns over Japan’s rising debt burden fuelled yen weakness, sending USD/JPY surging from just under 149.30 to above 150.70 at its peak. Ueda’s comments on intervention helped cap JGB yields, which edged lower afterward, allowing USD/JPY to pull back slightly to around 150.20 as of the latest update.

If an Asia market Wrap has a “Key Takeaway” today’s is that despite strong inflation data pointing toward further BOJ rate hikes, the combination of rising bond yields and government intervention threats shifted the market’s focus. Instead of reinforcing yen strength, concerns over Japan’s fiscal strain and potential BOJ bond-buying led to renewed yen selling, fueling a sharp USD/JPY rally.

***

While Japan’s bond market drama dominated the session, there were also remarks from Federal Reserve Governor Adriana Kugler and Reserve Bank of Australia (RBA) Governor Michelle Bullock, both striking a cautious tone on monetary policy.

• Kugler reinforced the Fed’s “wait and see” stance, emphasizing the need to assess factors such as the impact of tariffs and labor market conditions before making further policy decisions.
• Meanwhile, Bullock provided no clear signals on the timing of potential rate cuts in Australia, if any, maintaining a measured outlook.

This article was written by Eamonn Sheridan at www.forexlive.com.

OPEC+ is expected to postpone once again its 120,000 barrel-a-day hike

• if so it’ll be the fourth time the plan has been delayed
• currently OPEC+ aims to restore 2.2 mn barrels a day total, in monthly increments, starting from April

ANZ analysts:

• OPEC’s ability to phase out production cuts without disrupting the oil market is getting increasingly difficult
• Given the economic and geopolitical uncertainties and its need to support oil prices, we expect OPEC will delay

This article was written by Eamonn Sheridan at www.forexlive.com.

Reuters have the report. In brief:

• UK asset manager Abrdn is in advanced negotiations with Citic Bank to establish a joint venture in China’s asset management sector, according to sources familiar with the matter
• Abrdn is expected to hold a majority stake in the joint venture
• remainder owned by Citic Wealth, the wealth management arm of Citic Bank
• The two firms have been in discussions for several years about potential collaborations
• Abrdn and Citic Bank declined to comment

Citic Wealth is China’s third-largest bank-owned wealth manager, overseeing approximately 2 trillion yuan ($275 billion) in assets.

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan Prime Minister Ishiba is expressing concerns that rising yields will make debt servicing much more costly.

His fin min spoke on this earlier:

• More on Japan’s finance minister warning of fiscal strain as bond yields hit 15-year high

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan’s Finance Minister Katsunobu Kato warned that rising bond yields could strain the country’s finances, as the 10-year benchmark yield surged to 1.455%, its highest level since 2009. He noted that higher yields mean increased debt-servicing costs, which could pressure policy spending given Japan’s high debt-to-GDP ratio.

The jump in yields today followed stronger-than-expected inflation data:

• Japan’s Core Inflation Hits 19-Month High, Strengthening Expectations for BOJ Rate Hikes
• Japan January Core CPI 3.2% y/y vs. 3.1% expected

fueling speculation that the Bank of Japan (BOJ) may raise rates sooner than anticipated. While most economists expect the next hike in summer, recent economic growth and hawkish remarks from BOJ board member Hajime Takata have heightened expectations for a faster tightening cycle. We had similar sentiment expressed from an ex-BoJ official overnight:

• ICYMI former BOJ Sakurai hawkish comments: Could be a May hike, sees 1.5% by end FY 2026

Kato refrained from speculating on the cause of the yield increase, while BOJ Governor Kazuo Ueda said he did not discuss it with Prime Minister Shigeru Ishiba during their recent meeting.

Japan’s public debt is projected to reach 232.7% of GDP this year, according to the International Monetary Fund (IMF), raising concerns over the long-term impact of rising borrowing costs.

Fin Min Kato

This article was written by Eamonn Sheridan at www.forexlive.com.

Japanese Industry and Trade Minister Yoji Muto said that he aims to visit the United States at the earliest possible opportunity to engage in discussions with his U.S. counterparts regarding trade policies, including the impact of tariffs imposed by Washington.

Muto emphasized the importance of open dialogue between the two nations to address concerns related to trade barriers and ensure a fair and stable economic relationship.

Speaking at a regular press conference, Muto also announced plans to hold consultations with key representatives from Japan’s steel, aluminium, and automotive sectors early next week. These discussions will focus on assessing the potential effects of U.S. tariffs on Japanese industries and exploring strategies to safeguard domestic manufacturers. The minister underscored the government’s commitment to supporting local businesses and maintaining Japan’s competitive position in the global market.

This article was written by Eamonn Sheridan at www.forexlive.com.