Article Highlights

  • German retail sales m/m: -0.8% vs. -0.1% expected, -0.9% previous
  • German retail sales y/y: 2.3% vs. 0.75 expected, 0.4% previous
  • French final services PMI: 56.4 vs. unchanged at 56.7 expected
  • German final services PMI: unchanged at 54.4 as expected
  • Euro Zone final services PMI: 55.5 vs. steady at 55.6 expected
  • Euro Zone final composite PMI: unchanged at 56.0 as expected
  • U.K. services PMI: 53.3 vs. 54.0 expected, 54.5 previous
  • Euro Zone retail trade y/y: 1.2% vs. 1.5% expected, 1.2% previous
  • Voting FOMC members, including Fed Chair Yellen herself, will be giving speeches later
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Most currency pairs were range-bound during the session, likely because traders were waiting for what Fed Chair Yellen and other voting FOMC members have to say later. The session wasn’t a complete snooze fest, though, since euro and pound pairs were clearly on the move.

Major Events/Reports:

U.K. services PMI disappoints – Markit released the U.K.’s services PMI reading for February earlier today. And it came in at 53.3, which is a swing and a miss from the 54.0 consensus. More importantly, this marks the second month of deteriorating readings and is the worst reading in five months to boot.

According to the PMI report, the weaker reading “mainly reflected a softer pace of new business growth.” And this slowdown in new business growth was “linked to more cautious spending among consumers.”

Moreover, survey participants noted that average input prices rose “at the steepest pace since August 2008.” This has caused business costs to rise rapidly, which businesses then passed on to their customers. In fact, this “led to the largest increase in prices charged by service providers for almost eight-and-a-half years.”

Le Pen losing ground – According to the latest poll results form polling agency Odoxa, the anti-EU Front National’s Marine Le Pen is now expected to lose to Macron in the first round of the French election, with 27% for Macron and 25.5% for Le Pen. This is the first time that Odoxa’s poll results showed Le Pen losing the first round of the elections.

Moreover, Odoxa’s poll results also showed that if Fillon drops out and is replaced by Alain Juppe, then Juppe would garner 26.5% of the votes. This would make Juppe the leader of the pack, with Macron coming in second place. This also means that Marine Le Pen is effectively eliminated from the second round of the elections.

However, opinionway’s own poll results show that Le Pen is still maintaining her lead  in the first round of the elections, with 27% for Le Pen and 24% for closest rival Macron.

Some risk aversion in Europe – The risk off vibes from the earlier sessions apparently carried over into the European session.

  • The pan-European FTSEurofirst 300 was down by 0.23% to 1,478.38
  • Germany’s DAX was down by 0.17% to 12,038.50
  • The U.K.’s FTSE 100 was down by 0.15% to 7,371.30

U.S. equity futures were also feeling the risk-off vibes.

  • S&P 500 futures were down by 0.13% to 2,379.00
  • Nasdaq futures were down by 0.17% to 5,355.88

Aside from risk sentiment spillover, market analysts blamed the risk-off mood on disappointing reports for specific companies, as well as skittishness ahead of Fed Chair Yellen’s speech.

Major Market Movers:

GBP – The pound got slapped broadly lower when the U.K.’s services PMI reading turned out to be a miss. Aside from the disappointing miss. The details of the PMI report were also pretty gloomy. For one, new orders growth slowed down, which may be a sign that consumer spending may be weakening. Furthermore, businesses are passing on their higher input costs to customers, resulting in higher prices. And higher prices will likely weaken consumer spending further, potentially slowing overall future GDP growth and weakening inflationary pressure from domestic demand.

GBP/USD was down by 34 pips (-0.29%) to 1.2229, GBP/CHF was down by 53 pips (-0.43%) to 1.2365, GBP/AUD was down by 71 pips (-0.44%) to 1.6163

EUR – The euro had a good run during today’s morning London session, thanks to the most recent poll results for the French Presidential elections, as well as the risk-off vibes during the session.

EUR/USD was up by 36 pips (+0.35%) to 1.0557, EUR/JPY was up by 53 pips (+0.44%) to 120.76, EUR/GBP was up by 55 pips (+0.65%) to 0.8633

Watch Out For:

  • 2:45 pm GMT: Markit’s finals services PMI (unchanged at 53.9 expected)
  • 3:00 pm GMT: ISM’s non-manufacturing PMI (steady at 56.5 expected)
  • 3:15 pm GMT: Chicago President Charles Evans will talk in a panel discussion
  • 5:15 pm GMT: Fed Governor Jerome Powell has a speech
  • 6:00 pm GMT: Fed Chair Yellen will speak
  • 6:00 pm GMT: Fed Governor Stanley Fischer scheduled to speak

See also:

Asian Session Recap 
U.S. Session Recap

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