Market Review - 20/02/2014 21:17GMT

Euro weakens on Thursday after weak PMI data

The single currency dropped against the dollar on Thursday after data showed that private sector activity in the euro area slowed in February. Euro dropped from Asian high of 1.3763 to as low as 1.3686 after the disappointing PMI reports before stabilizing. Later, the pair climbed back to 1.3729 in New York morning and then traded sideways in New York afternoon.

The French manufacturing PMI fell to a two month low of 48.5, while the nation's services PMI fell to a nine-month low of 46.9. Meanwhile, Germany's manufacturing PMI slowed to 54.7 from 56.5 in January, while the country's services PMI rose to 55.4 this month from 53.1 in January. Later, a separate report showed that the euro zone's manufacturing PMI fell to a two-month low of 53.0 from 54.0 in January, compared to expectations for an unchanged reading.

Dollar fluctuated wildly against the yen on Thursday, although the safe haven yen was boosted after data showed that the preliminary reading of China's HSBC manufacturing index fell to a seven month low of 48.3 this month, down from 49.5 in January and usd/jpy fell fm Asian high of 102.40 to 101.67 in European morning, renewed buying lifted price from there and dollar later rose to 102.42 in New York morning after reports showed that U.S. jobless claims fell last week, U.S. consumer prices rose broadly in line with forecasts in January, and U.S. manufacturing PMI expanded at the fastest pace this month since May 2010.

U.S. consumer prices rose 1.6% on a year-over-year basis in January, in line with expectations. Consumer prices were 0.1% higher from a month earlier, also matching forecasts. The number of people who filed for unemployment assistance in the U.S. last week fell by 3,000 to 336,000, slightly below expectations for a decline of 4,000.

Market research group Markit said that its preliminary U.S. manufacturing PMI increased to 56.7 in February from a final reading of 53.7 in January.

Cable moved closely with euro and dropped from Asian high of 1.6995, price briefly penetrated Wednesday low at 1.6637 to 1.6635 in European morning but active cross-buying of sterling limited intra-day losses there. Later, cable was lifted to 1.6700 in New York morning and moved in a choppy fashion for rest of the session.

In other news, BoJ board member Morimoto said on Thursday that 'Japan economic growth to exceeding potential despite impact of sales tax hike; important to average out swing caused by sales tax hike when making policy decision; Japan's economy is steady making progress towards 2% inflation target; needs to monitor impact of Fed tapering on capital flows n real economy; JGB yields may rise in a way derivating from economic fundamentals n trust in Japan's finances is lost.'

Data to be release on Friday:

UK retail sales, public sector net borrowing, Canada CPI and U.S. existing home sales.