Headlines

* Putin to update Russia’s elite on Ukraine war in major speech

* BoJ’s Kuroda: Wages set to accelerate on high job market

* Dollar rally steadies at traders wait on Fed minutes, data

* Asia shares stutter, US futures fall, try to rebound from third weekly decline

FX: USD dipped slightly in a narrow range day. Modest buying this morning has taken the index above 104 this morning. The benchmark US Treasury 10-year yield is consolidating its recent gains. It touched 3.92% last week before pulling back.

EUR printed a very small doji candle. It remains pressured this morning and has moved below yesterday’s low.  GBP is struggling to keep above 1.20. UK PM Sunak was warned that a Northern Ireland deal could trigger resignations within the Conservative party. USD/JPY traded narrowly but has pushed above 134. There was mixed PMI data. BoJ’s Kuroda said that wages are likely to rise due to labour demand and inflation. But he believes inflation will begin to slow in mid-FY’23.  AUD is trading around its 50-day SMA at 0.6890 and a Fib level just below. The RBA minutes revealed the bank considered a 25bp and a 50bp rate hike, with further rises in the months ahead.

Stocks: US equity markets were closed for Presidents’ Day.

Asian stocks were subdued with mostly rangebound trading. The ASX 200 was lower after a bunch of company results. This included a drop in mining giant BHP’s profits. The Nikkei 225 was contained after mixed PMI data. Manufacturing dropped by the fastest pace in two and a half years. Services PMI showed a firmer expansion.

US equity futures are drifting lower as traders return to their desks later after the holiday. European equity futures are pointing to a weaker open.

Gold is softer this morning after a very quiet day yesterday.

Day Ahead – Eyes on flash PMIs

We get PMI survey data released today. These are an all-important gauge for how businesses view the economic outlook. The previous surveys in the eurozone painted a brighter picture. They highlighted an improvement in growth momentum and suggested the region might escape recession. These hopes underpinned support for the euro. But most of this progress was due to warmer weather conditions. 

New business orders kept falling, which suggests that economic growth will likely be anaemic in the coming quarters, even if the region ultimately dodges a recession. Whether this pattern continues in the February surveys could decide price action in the euro’s recovery. The PMI readings are seen hovering around the 50 area. The market will also take notice of the Chinese February PMI readings which come out later this week.

Chart of the Day – NZD/USD close to major support

The RBNZ meets overnight at its first rate setting decision since November. Policymakers are widely expected to raise borrowing costs by a further 50 basis points, taking the cash rate to 4.75%. This would be a slowdown from its previous pace of hikes. Recent data suggests it’s too early for the RBNZ to pause its tightening campaign. Unemployment remains very low, and wages are rising at a record pace. Inflation has only recently started to ease and inflation expectations are elevated.

The market wants to know if the bank will raise their projected terminal rate even higher than the lofty 5.50% they estimated back in November. If this is unchanged, NZD will need some hawkish commentary to remain supported. This year’s low is at 0.6191. The 200-day SMA is just below at 0.6185. The 100-day SMA reinforces this support area at 0.6168.