Article Highlights

  • U.S. Feb flash services PMI down from 55.6 to 53.9 vs. 55.8 forecast
  • U.S. Feb flash manu PMI down from 55.0 to 54.3 vs. 54.7 consensus
  • New Zealand GDT auction yielded 3.2% decline in dairy prices
  • FOMC member Kashkari: Fed should also be on the lookout for potential crisis
  • Kashkhari: Fed will reduce balance sheet when economy is ready
  • FOMC member Harker: March rate hike could still be on the table
  • Harker: Weak data ahead of March meeting could discourage him to hike
  • Harker: Three hikes possible this year
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The Greenback paused from its recent rallies as downbeat medium-tier reports gave traders reason to doubt that a March Fed rate hike is in the bag.

Major Events:

U.S. flash PMIs fall short – Early PMI readings from Markit are suggesting that business activity took a step back this month, with both manufacturing and services sectors printing weaker than expected results. For this month, the flash manufacturing PMI slid from 55.0 to 54.7 versus the 54.3 consensus to indicate a slowdown in industry expansion while the flash services PMI dipped from 55.6 to 53.9 instead of rising to the projected 55.8 figure.

Components of the report revealed that output and new orders lagged in the manufacturing sector this month while the services industry was spurred by moderation in new business expansion and job creation. Also, the February services PMI also reflected a downturn in business outlook as this particular sub-index fell to its weakest level since September last year.

According to Chris Williamson, Chief Business Economist at IHS Markit, this drop in PMI readings suggest that the post-election euphoria is starting to fade as the pickup in business output, new orders, and hiring lost momentum. A pullback in business optimism was also noticeable for the month, although the overall readings remain broadly consistent with the current pace of economic growth.

Remarks from FOMC members  – Voting members Kashkari and Harker gave testimonies yesterday and, even though most of their remarks gave off some hawkish vibes, these didn’t seem enough to cheer dollar bulls up.

For Philadelphia Fed President Patrick Harker, a March rate hike could still be on the table as economic data has been mostly upbeat so far. He even reiterated that he maintains his forecast of three interest rate hikes this year, citing that inflation expectations are closing in on 2% and that strong consumer spending should continue to support GDP growth this year. He also pointed out that the jobs market is “more or less” at full capacity, but warned that there are still a bunch of reports due before the March meeting and that weak results could discourage him from voting to tighten.

Meanwhile, Minneapolis Fed President Neel Kashkari focused mostly on the need to pay attention to potential risks from the financial sector. He explained that it’s also the Fed’s unofficial mandate to watch out for signs of instability that could put the economy back in crisis mode. He warned that taxpayers could still carry the burden of bailing out banks if another market crash takes place. Yep, a bit of a buzzkill but the man’s got a point!

Major Market Movers:

EUR –  Interestingly enough, the shared currency was the biggest mover for the session as it hardly looked back from its dive.

EUR/NZD dropped from 1.4778 to a low of 1.4705, EUR/AUD fell from 1.3803 to a low of 1.3718, EUR/CAD is down from 1.3875 to 1.3844, EUR/USD is still treading sideways at 1.0550, and EUR/JPY consolidated above 119.75.

Watch Out For:

  • 12:30 am GMT: Australia construction work done q/q
  • 12:30 am GMT: Australia wage price index q/q (0.5% expected, 0.4% previous)
  • 2:00 am GMT: New Zealand credit card spending (8.5% previous)

See also:

London Session Recap

Asian Session Recap

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