UK PMIs continue to show solid growth

United States Dollar:

The big release yesterday from the UK was the monthly Manufacturing PMI which came in at a slightly under-par 55.3 (exp 56.7). Sterling slipped a little on the release falling back from 1.6655 to a session low of 1.6618. Although this was the fourth successive fall from Decembers reading of 58.4 and the lowest since August the reading was still very much in expansion territory. The report said 2014 growth so far had been hot rather than the scorching growth of late 2013 and Q1 GDP was likely to be at least 0.7%. Later on in the day we had the monthly ISM Manufacturing PMI reading from the States which posted 53.7 (exp 54.2). It stated that there had been a robust improvement in business conditions; output and new orders had risen and employment in the sector had increased for the ninth consecutive month. Cable remained range bound throughout the rest of the session. Eyes will start to look towards Fridays Non-Farms to see if the economy is back to normal after the recent bad weather. A reading of 200k for the month is expected. Later today we have the UK Construction PMI with a reading of 63.1 expected as well as the ADP Non-Farm Employment change from America which should show an increase of 192k. GBP/USD currently trades at 1.6650 after another solid but slightly worse than expected UK Construction PMI release of 62.5 (exp 63) We expect a range today in the GBP/USD rate of 1.6580 to 1.6750.

Euro:

Yesterday saw the monthly batch of Manufacturing PMIs from the Eurozone. Spain, Italy and France all posted slightly better than expected figures of 52.8, 52.4 and 52.1 respectively with the German release printing a worse than expected 53.7. Holders of the common currency would have been buoyed by all of the releases coming out safely in expansion territory. Further good news came when the unemployment in the Eurozone dipped under 12% for the first time since March 2013 coming out at 11.9%. EUR/USD which started the London session yesterday at 1.3785 peaked at 1.3815 before paring its gains. It currently trades at 1.38. Tomorrows Euro Minimum Bid Rate is expected to be held at 0.25% however there is a slim chance that Draghi may have to announce some further stimulus measures to counter the falling level of inflation. Remember back in November he unexpectedly cut rates from 0.5% to 0.25%. EUR/GBP currently sits at .8285. We expect a range today in the GBP/EUR rate of 1.20 to 1.2150

Aussie and Kiwi Dollars:

The recent run of better than expected releases for the Aussie came to an end overnight with a much worse than expected Building Approvals result which came in at -5.0% for the month (exp -1.7%). AUD/USD gapped from .9250 to .9225 on the release but quickly reversed its losses. The recent calm market conditions have helped the Aussie with the risk-on conditions leading investors to seek its higher yield and it remains close to multi-month highs against the Greenback. AUD/USD currently trades at .9254. Tonight sees Australian Retail Sales and Trade Balance releases as well as Governor Stevens talking at a lunch in Brisbane. There were no data releases of any note from New Zealand so the Kiwis movements mirrored the Aussies. It has also been benefitting from the relative quiet market conditions. GBP/AUD currently trades at 1.80 with GBP/NZD trading at 1.94. We expect a range today in the GBP/AUD rate of 1.79 to 1.8150. We expect a range today in the GBP/NZD rate of 1.9280 to 1.95.

Data releases for the next 24 hours:

AUD: Retail Sales m/m, Trade Balance, RBA Governor Stevens Speaks

EUR: Ecofin Meetings

GBP: Construction PMI, MPC Member Cunliffe Speaks

NZD: No Releases

USD: ADP Non-Farm Employment Change