A surprising pickup in US weekly jobless claims proved on Thursday how easily market sentiment can switch from hopes of a speedy recovery to doubts of a robust expansion, triggering another surge in longer-term US treasury yields and a pullback on Wall Street through the reflation channel.
On Friday, the e-mini futures of the S&P 500 and Nasdaq 100 were pointing to a slight positive open, though the stock indices will have to push harder if they want to offset their weekly losses.
US Markit flash PMI figures for February could be the next challenge in a few minutes, with the dollar index changing hands lower on the day ahead of the release. Expectations are for the business survey to reveal a modest decline in activity but hold well within the expansion area.
Commodity currencies enjoy dollar weakness
Despite the weakness in the dollar, gold remained in the sea of red following the slide to a 7-month low of $1,760. On the other hand, the commodity currencies got the upper hand to become the best performers of the day. AUD/USD shot above the 0.7800 ceiling to a fresh 34-month high, while NZD/USD peaked marginally below the 0.7300 mark. The loonie held the third spot, but was struggling to overcome the 1.2625 barrier against the dollar, and the battle turned even difficult after December’s disappointing Canadian retail sales.
European PMIs bring little volatility; BoE comments boost pound
In Europe, the stronger-than-expected upside in the Eurozone Markit flash Manufacturing PMI scrapped the decline in the services sector, helping EUR/USD to climb as high as 1.2143 and closer to the restrictive 50-day simple moving average. EUR/GBP showed a faded sparkle, unable to trim yesterday’s losses.
The German 10-year Bund yield, which unlocked a new 8-year high earlier on Friday thanks to the reflation narrative, almost ignored the sharp improvement in the Manufacturing PMI, but stock indices found some, with the DAX 30 fully recouping yesterday’s losses after the release.
Meanwhile in the UK, the positive surprise in flash Markit PMIs did not cause any immediate reaction to the pound, nor did the negative print in retail sales earlier in the day. However, comments by the BoE policymaker Gertjan Vlieghe caught some attention, sending GBP/USD up to 1.4017 after he said that the economy may not need further monetary loosening if it strongly recovers in line with the central bank’s forecasts. Still, he did not exclude the case of negative interest rates in the coming years.