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Germany reported a further unemployment decline of 33,000 for February after a 48,000 decline the previous month.  Euro-zone consumer prices increased 0.9% for February with the year-on-year rate increasing to 5.8% from 5.1% which was above consensus forecasts of 5.3% and a fresh record high. The core annual rate also increased to a fresh record high of 2.7% from 2.3%, maintaining pressure on the ECB to take action.

Bundesbank head Nagel also stated that the ECB must adjust the course of monetary policy if price stability demands it. There was, however, a further erosion of market expectations surrounding ECB policy with only 15 basis points of tightening priced in by the end of 2022 which sapped Euro support.

In prepared testimony, Fed Chair Powell stated that he expects it will be appropriate to raise interest rates in March with the need to move away from highly stimulative monetary policy settings. He added that the impact of the Russian invasion of Ukraine is highly uncertain and that making appropriate decisions must recognise this.

Powell also commented that the labour market is extremely tight and wages are increasing at the fastest rate in many years while supply disruptions have also been larger and longer-lasting than anticipated. The prepared comments reinforced expectations that the Fed would opt for a modest rate hike this month and Powell subsequently confirmed that the bank was expecting to raise rates by 0.25% at the meeting.

Chicago Fed President Evans stated that inflation is extremely high and that needs to be addressed by monetary policy with policy moving towards neutral. He added that it will take until 2024 to get inflation back down to 2%. The Euro dipped to lows around 1.1060 after the Fed commentary before a recovery to 1.1100. The Euro was close to 1.1100 on Thursday with further reservations over the Euro-zone outlook continuing to sap potential support as oil prices posted a 9-year high.




The US ADP data recorded an increase in private-sector unemployment of 475,000 for February and above consensus forecasts of 380,000. The credibility of the data was, however, damage further by revisions to the January data with the original figure of a 301,000 decline revised to show a substantial increase of 509,000.

US treasuries gradually lost ground ahead of Wednesday’s New York open and the trend continued after the ADP data with the 10-year yield rising to near 1.80%. Equities opened higher on Wall Street with the dollar strengthening to the 115.35 area.

US yields continued to move higher at the European close with the dollar advancing to 115.60 as equities held a firm tone.

China’s Caixin PMI services index retreated to 50.2 for February from 51.4 previously with on-going measures to prevent the coronavirus spread having a significant impact in dampening confidence. Asian equities overall edged higher as risk appetite held steady with markets focussing on a further surge in oil prices.

US Treasury futures were little changed on Thursday with the dollar trading around 115.65 and the Euro around 128.40 as defensive yen demand eased slightly.




Nationwide reported an increase in house prices of 1.7% for February with the annual increase at a 7-month high of 12.6% from 11.2% as prices posted a fresh record high. Nationwide still expected that there would be a slowdown in the sector over the next few months given wider economic pressures.

Sterling remained vulnerable in early Europe, but gradually recovered some ground as risk appetite recovered. The UK currency was hampered by the sharp decline in yields and reduced expectations surrounding Bank of England tightening, although the impact was limited by lower yields elsewhere.

As risk appetite improved further, Sterling recovered to above 1.3350 against the dollar while the Euro retreated sharply to test important support near 0.8300 at the European close. Sterling made further headway later in the day and traded just above 1.3400 against the dollar on Thursday while the Euro retreated to 2-year lows around 0.8280 and very close to 5-year lows as the Euro remained under wider pressure in global markets.




The Swiss franc maintained a firm tone in early Europe on Wednesday, but there were very limited net losses later in the day as risk conditions stabilised to some extent.

The Euro recovered to around 1.0230 against the Swiss currency while the dollar secured a net gain to 0.9220.

Given geo-political fears and uncertainty over global financial flows there was further reluctance to consider selling the Swiss currency.

The franc resisted selling pressure on Thursday despite a net gain in global equities with the Euro trapped just above 1.0200 and the dollar at 0.9200.


Technical Levels



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