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The final Eurozone manufacturing PMI index was revised slightly lower to 58.7 from the flash reading of 59.0 with a significant miss for the Italian reading while the Spanish reading met market expectations. Germany recorded a sharp unemployment decline of 48,000 for January after a decline of 29,000 the previous month and compared with a decline of around 5,000. The German 2-year yield increased to a 6-year high which helped underpin confidence in the Euro. The single currency maintained a firm tone in European trading on Tuesday and pushed to highs near 1.1280 with the dollar also tending to drift lower against all major currencies.

The US ISM non-manufacturing index declined to 57.6 for January from 58.8 the previous month and in line with consensus forecasts. There was a slowdown in new orders growth and production growth while order backlogs also grew more moderately on the month.

Employment increased moderately on the month while prices increased at a faster rate, although the prices component remained below levels recorded late in 2021.

JOLTS data recorded an increase in job openings to 10.93mn for December from 10.78mn the previous month and above market expectations of 10.30mn.

Markets had been braced for a weaker release and the data overall provided an element of relief with the Euro retreating to below 1.1250 although the dollar overall struggled to gain any significant traction. The Euro was hampered to some extent by tough rhetoric from Russian President Putin over Ukraine, although there was no sustained selling at this stage and the Euro held firm around 1.1275 on Wednesday as the dollar was unable to secure a sustained recovery.

The focus will shift to the US jobs data with the ADP released on Wednesday ahead of Friday’s employment report. Philadelphia Fed President Harker did warn that the forthcoming employment report could be weak due to an Omicron impact with markets expecting a sharp slowdown in job growth for the month.




Philadelphia’s Harker stated that a 25 basis point rate increase is warranted in March. He added that the Fed may need to move more aggressively if there is a spike in inflation and it could do a 50 basis-point increase, although he is a little less convinced of that right now. Atlanta Head Bostic stated that businesses were seeking alternate suppliers which were tending to increase costs and there would be a real risk if expectations increased to 4% or higher.

US Treasuries strengthened at the New York open, but lost ground following the ISM data with the 10-year yield moving back above 1.75% with reduced speculation of a 0.50% March rate hike. In this environment, the dollar rallied from lows around 114.60 to trade little changed, although there was still selling interest on rallies.

Narrow ranges prevailed on Wednesday with Chinese markets remaining closed for the new-year holidays with the dollar trading around 114.65 against the yen.




Nationwide reported an increase in UK house prices of 0.8% for January with a year-on-year increase of 11.2% from 10.4% previously. UK mortgage approvals increased to 71,000 for December from 67,900 the previous month and above consensus forecasts. There was a slight overall slowdown in net lending to individuals to £4.4bn from £4.9bn the previous month, although slightly above market expectations with a solid increase in consumer credit.

The final UK PMI manufacturing index was revised higher to 57.3 from the flash reading of 56.9. There was a slight slowdown in new orders growth while there was a slight easing of supply-side pressures. There was also a net easing of upward pressure on costs for the month.

There was limited impact from the data, although overall Sterling sentiment held firm amid expectations that the Bank of England would sanction another interest rate increase at this week’ meeting. There are strong expectations that the bank will raise rates to 0.50% on Thursday with higher yields underpinning the UK currency.

Sterling broke above 1.3500 against the dollar while the Euro retreated to around 0.8325 as risk appetite held steady. BRC data recorded a 1.5% annual increase in shop prices for December, the strongest reading since 2012 with Sterling holding above 1.3500 against the dollar on Wednesday.




The Swiss PMI manufacturing index strengthened to 63.8 for January from 62.7 previously, but slightly below consensus forecasts. The franc maintained a strong tone in Europe on Tuesday with expectations that the Swiss currency would strengthen over the longer term. There was also some speculation that the National Bank would draw back from negative interest rates. The Euro retreated towards 1.0370 before stabilising while the dollar dipped to test the 0.9200 level.

There was little change on Wednesday with the dollar trading just above the 0.9200 level with risk conditions broadly stable.


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