Service Sector PMIs Put the EUR and USD in Focus, with ADP Nonfarms to also Influence

Earlier in the Day:

It’s was a particularly busy start to the day on the economic calendar this morning. The Aussie Dollar, Kiwi Dollar, and the Japanese Yen were in action this morning. Economic data from China was also in focus in the early part of the day.

For the Kiwi Dollar

Building consents rose by 2.1% in January, following a 5.1% jump in December.

According to NZ Stats,

• The annual number of new homes consented in the year ended January 2021 was 39,881, up 5.8% year-on-year.
• January’s number fell just 144 short of a Feb-1974 all-time high 40,025 for any 12-month period.

The Kiwi Dollar moved from $0.72933 to $0.72821 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.03% to $0.7392.

For the Aussie Dollar

The Australian economy was in focus.

In the 4^th quarter, the economy expanded by 3.1%, following 3.3% growth in the 3^rd quarter. Economists had forecast growth of 2.5%.

Year-on-year, the economy contracted by 1.1%, coming in ahead of a forecasted 1.8% contraction. In the 3^rd quarter, the economy had contracted by 3.7%.

According to the ABS,

• Household spending increased by 4.3% as a result of easing COVID-19 restrictions.
• Private investment rose by 3.9%, contributing 0.7 percentage points to growth.
• Compensation to employees rose 1.5% as a result of a rise in employment and hours worked.
• Agricultural production jumped, supported by favorable weather conditions

The Aussie Dollar moved from $0.78251 to $0.78337 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.15% to $0.7832.

For the Japanese Yen

The Services PMI rose from 46.1 to 46.3 in February, which was up from a prelim 45.8.

According to the February Market Survey,

• Employment expanded for the first time since Feb-2020. Supported by improved optimism about the year ahead. Optimism hit a 37-month high.
• New business inflows fell for a 13^th consecutive month, with the rate of contraction the sharpest since last May.
• Foreign demand for services declined at a softer pace than that for total new business.
• Firms registered a rise in average cost burdens for a 3^rd consecutive month, though the increase was marginal.
• In spite of rising costs, firms reported lower output charges for the 12^th month in a row. The rate of decline was also the most marked since Aug-2020.

The Japanese Yen moved from ¥106.731 to ¥106.769 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.12% to ¥106.82 against the U.S Dollar.

From China

Service sector activity was also in the spotlight.

In February, the Caxin Services PMI fell from 52.0 to 51.5.

According to the February Survey,

• Business activity growth slowed to a 10-month low in February, coinciding with a weaker rise in new business.
• A fall in new export work weighed on overall new business mid-way through the quarter.
• Firms reported that the recent resurgence of COVID-19 cases globally weighed on sales growth.
• New export orders fell for the first time since last October.
• Firms reduced headcounts for the first time since last July.
• In spite of falling headcounts, there was little pressure on operating capacities in February.
• Companies registered a further steep increase in operating costs. Greater purchasing and staffing costs were cited as key inflation drivers.
• While operating costs were on the rise, firms only partially passed on higher input costs to clients.
• Optimism was amongst the strongest seen over the past 8-years, supported by hopes of a near-term end to the COVID-19 pandemic.

The Aussie Dollar moved from $0.78314 to $0.78304 upon release of the figures.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Service sector PMI numbers for Italy and Spain are in focus later this morning.

Finalized service and composite PMIs for France, Germany, and the Eurozone are also due out.

Barring any marked revisions from prelims, expect Italy and the Eurozone’s PMIs to be the key drivers.

Other stats include 4^th quarter GDP numbers from Italy. Expect any revisions to influence.

At the time of writing, the EUR was down by 0.04% to $1.2086.

For the Pound

It’s a relatively busy day ahead on the economic calendar. Finalized service and composite PMI numbers for February are due out.

Expect Pound sensitivity to the services PMI in particular.

Away from the economic calendar, however, the UK Annual Budget release will be the main event of the day.

The markets will be looking unwavering support from the government. Anything less and the Pound could come under pressure.

At the time of writing, the Pound was up by 0.01% to $1.3957.

Across the Pond

It’s busy day ahead on the economic calendar. The market’s preferred ISM non-manufacturing PMI figures are due out along with ADP nonfarm employment change numbers.

Finalized Market service and composite PMIs are also due out, though we would expect the stats to have a muted impact on the Dollar.

From elsewhere, chatter from the Senate on Biden’s COVID-19 relief package will also need tracking.

At the time of writing, the Dollar Spot Index was down by 0.01% to 90.776.

For the Loonie

It’s a quiet day ahead, with no material stats to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of the weekly crude oil inventory numbers and market risk appetite.

At the time of writing, the Loonie was up by 0.02% to C$1.2633 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.