EUR / USD
The Euro-Zone industrial sentiment index edged lower to 0.5 for February from 1.2 previously and below consensus forecasts of 2.0 while there was also a net retreat in services-sector index. The overall business and consumer survey declined marginally to 99.7 from 99.8 and below market expectations of 101.0. The data overall triggered further reservations over the Euro-Zone outlook with no further support from the decline in energy prices, although gas prices hit fresh 18-month lows which should underpin confidence. The Euro did manage to resist further selling after the European open and managed to crawl higher amid a phase of dollar consolidation.
The Euro managed to edge above 1.0600 after the New York open, although overall single-currency sentiment was still fragile.
There will be significant month-end position adjustment on Tuesday which will lead to choppy overall trading during the day. There will also be inflation releases from France and Spain ahead of the German and Euro-Zone figures over the following two days.
The Euro was unable to hold above the 1.0600 level on Tuesday and settled around 1.0585 in early Europe with traders still reluctant to sell the US currency.
The yen was unable to make any headway ahead of Monday’s New York open with the dollar holding above the 136.00 level amid yield support for the US currency.
US durable goods orders declined 4.5% for January after a revised 5.1% increase the previous month and slightly weaker than consensus forecasts. Underlying orders increased 0.7% after a 0.4% decline the previous month.
Pending home sales recorded an 8.1% rebound for January after a revised 1.1% increase the previous month, but overall data releases were mixed.
The Dallas Fed manufacturing index dipped to -13.5 for February from -8.4 previously with a slide in weak orders, but there were increased inflation pressures.
The BIS commented on Monday that central banks needed to get the job done when it comes to controlling inflation and avoid declaring victory too early.
US Treasures secured a marginal advance after the US open with the 10-year yield edging lower and the dollar again testing support just below the 136.00 level.
Fed Governor Jefferson rejected the arguments for raising the inflation target to above 2%. On the short-term outlook, he commented that recent data suggested that wage inflation pressure was easing while the outlook for core services inflation is uncertain.
The dollar continued to find support on dips and traded just above 136.00. Rhetoric from Bank of Japan nominees continued to suggest that there would be no short-term policy changes which limited any potential yen support and the dollar held firm around 136.40 in early Europe on Tuesday.
Sterling was able to resist selling pressure after Monday’s European open and gradually gained traction ahead of the New York open. There were expectations that the UK and EU would announce a deal on the Northern Ireland protocol later in the day. There was also a slightly firmer tone surrounding risk appetite which helped underpin confidence as equities attempted to recover some ground.
Sterling gradually advanced towards the 1.2000 level against the dollar and broke above this level after the New York open as equites made further headway.
In a press conference with EU Commission President Von der Leyen, Prime Minister Sunak confirmed that there was a deal on the Northern Ireland protocol with a new Windsor Framework. The agreement will be significant in reducing friction surrounding trade and did have an impact in underpinning confidence surrounding the economic outlook and Sterling. The Euro dipped to test the 0.8800 level before a tentative and limited recovery.
Markets will remain on alert for comments from Bank of England officials during the day, although risk conditions are likely to remain a key element with Sterling around 1.2040 on Tuesday. Markets will also monitor commentary from Unionist politicians in Northern Ireland and the Euro dipped below 0.8800 amid firm UK sentiment.
Total Swiss sight deposits declined to CHF520.7bn in the latest week from CHF526.8bn the previous week. After a period of stabilisation, the fresh decline in deposits suggests that the National Bank is looking for a further tightening of liquidity.
The franc was mixed during the day as the Euro posted gains to 0.9950 before settling around 0.9930 while the dollar dipped to lows just below 0.9350.
The franc recovered some ground on Tuesday with the dollar recovering to around 0.9380.