The ISM manufacturing index declined to 52.9

Market movers today

• Today’s calendar is very light. In Germany retail sales for January will be released this morning. There were strong gains in German retail sales in both November and December, suggesting that so far the drop in the crude oil price and inflation have been a boost to private consumption.

• In the UK the manufacturing PMI and construction PMI for February will be released today. We expect a slight decline in the manufacturing PMI but it should be remembered that manufacturing PMI in particularly the UK is much less important than service PMI scheduled for release tomorrow, where we expect to see a slight improvement.

• Switzerland will release the first estimate for GDP growth in Q4 14. However, Q4 is largely history and focus is already on how much the sharp appreciation of the CHF so far this year will weigh on growth in 2015.

• In the US auto sales for February released this evening is interesting as it will give us an early indication of the strength of retail sales and private consumption in February.

• Danmarks Nationalbank publishes February FX reserves. For more on Scandi markets see page 2.

Selected market news

EUR/DKK dropped sharply yesterday afternoon to 7.4530 from around 7.4630. The move highlights that the pressure remains on the downside amid ECB preparing to begin purchases of government bonds and the market speculating in the sustainability of the Danish fixed exchange rate policy.

US Treasuries posted decent losses yesterday as 5y, 10y and 30y yields rose by 6-8bp. The price movements come on top of a 30bp increase in the mentioned tenors in February and now stand some 10bp below their highest level in 2015. US data were, however, mixed. The ISM manufacturing index declined to 52.9 and the details were weak with new orders and employment moving lower. On the other hand, the final reading of the Markit PMI was revised higher to 55.1. The ISM has overshot actual manufacturing production for a while and a decline was overdue but we are now close to the bottom.

Contrary to expectations, the Reserve Bank of Australia left the overnight cash rate unchanged at 2.25% but stated that further easing could become necessary in the period ahead. AUD/USD initially climbed as much as 1%. While today’s decision highlights a degree of caution in the board with respect to the housing market, we still expect RBA to eventually cut rates further in order to ease the rigid transition from a commodity-based economy to a diversified model. Consequently, we maintain our view that more AUD downside will play out in the coming months.

The oil price rose overnight and WTI is now trading close to USD50 per barrel again.