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EUR/USD

The Euro-zone PMI services-sector index was revised marginally lower to 52.6 from 52.8 previously, but the composite index was unchanged at a 6-month high of 51.6. The German composite index dipped to a 2-month low amid export pressures.
US ADP employment data recorded an increase in private-sector jobs of 183,000 for February and above consensus forecasts of 170,000, although there was a sharp downward revision for January to 209,000 from the 291,000 reported previously. The latest release is likely to raise fresh doubts over the accuracy of the data ahead of Friday’s jobs data.
The ISM non-manufacturing index strengthened to a 12-month high of 57.3 for February from 55.5 previously and above consensus forecasts of 54.9. Although business activity faded slightly, new orders expanded at a stronger pace and the highest reading since June 2018. Employment increased at a faster pace, but the rate of price increases lowed on the month.
The Markit PMI services-sector index, however, was confirmed at 49.4 for February, the weakest reading for over six years. The sharp divergence between indices increased underlying uncertainty and there were expectations of a sharp downturn for March readings. The Fed’s Beige Book reported modest to moderate growth in the latest period, but the COVID-19 coronavirus was cited as a risk and already weighing on travel and tourism. The dollar remained vulnerable on yield grounds
The Euro was hampered by renewed fears over the Italian coronavirus outbreak with all schools and universities closed for 2 weeks. The dollar remained vulnerable, however, on low yields with the Euro near 1.1130 and little changed on Thursday.

JPY

US equity futures held gains into the New York open which limited potential defensive demand for the Japanese yen.
Treasuries continued to move higher, however, with the 10-year yield held below 1.00%. Although there was a stronger ISM non-manufacturing reading, the dollar struggled to make headway and was held below 107.50 into the European close.
US equity market strengthened sharply in late trading with increased confidence that Biden would win the Democrat Party nomination also a positive factor for stocks. The dollar still struggled to make any impression against majors.
Asian markets still posted net gains, but California announced a state of emergency due to the coronavirus which dampened sentiment and the 10-year yield was only just above 1.00% which limited underlying dollar support, especially with some speculation that the Fed would cut interest rates again at the March 18th meeting and it retreated to the 107.25 area.

GBP

The final UK PMI services index was revised marginally lower to 53.2 from the flash reading of 53.3 with a slowdown in the rate of growth in new business, primarily due to the impact of cancellations and project delays due to the coronavirus outbreak. There was a significant increase in cost pressures and charges increased at the fastest pace since November 2017. Higher inflation pressures will make the Bank of England’s policy balancing act even more difficult.
Incoming Bank of England Governor Bailey stated that the bank could take bank rate down to about 0.1%, but there is limited policy ammunition. He also commented that further evidence was needed before making a decision which curbed speculation of an emergency rate cut. Sterling secured an element of support from expectations that the central bank had less scope to cut interest rates compared to other central banks while fiscal policy could be boosted significantly. There were gains to 1.2870 against the dollar while the Euro retreated to near 0.8650 and Sterling held steady on Thursday.

CHF

Swiss consumer prices increased 0.1% for February, with the year-on-year rate declining to -0.1% from 0.2% compared with market expectations of 0.1%. The data will maintain National Bank unease over franc strength and reinforce demands for gains to be resisted.
The Swiss currency was broadly resilient during the day despite gains for global equities with the Euro held around 1.0660 while the dollar was held below 0.9600. Rhetoric from bank officials will continue to be monitored closely ahead of the policy meeting later in March with the franc little changed on Thursday.

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