Markets Report - 21 February2023

A daily breakdown of the markets for the 21st February 2023, provided to you by Sterlex.

🇪🇺💶The German manufacturing sector contraction unexpectedly deepened in February even as supply bottlenecks eased rapidly, the preliminary manufacturing activity report from S&P Global/BME research showed this Tuesday. The Manufacturing PMI in Eurozone’s economic powerhouse came in at 46.5 this month vs. 47.8 expected and 47.3 prior. The index dropped to a new three-month low. Meanwhile, Services PMI jumped from 50.7 in December to 51.3 in February as against the 51.0 consensus forecast. The PMI hit the highest level in eight months. EUR/USD remains pressured toward 1.0670 following the release of the Eurozone PMIs. The spot is losing 0.13% on the day.

🇬🇧💷The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) unexpectedly improved to 49.2 in February versus 46.8 expected and, January’s 47.0 final readout. Meanwhile, the Preliminary UK Services Business Activity Index for February jumped to 53.3 as against January’s 48.7 final print and 48.3 expected. The unexpected improvement in the UK Manufacturing and Services PMI has a positive impact on the GBP/USD pair. The spot is adding 0.57% on the day to trade at daily highs near 1.2100.

🇺🇸 🏦The US Dollar buying remains unabated amid firming expectations for further policy tightening by the Fed and turns out to be a key factor acting as a tailwind for the USD/JPY pair. In fact, the markets have been pricing in at least a 25 bps lift-off at each of the next two FOMC meetings in March and May in the wake of stubbornly high inflation. Amidst escalating geopolitical tensions surrounding the Rusisa-Ukraine war, markets continue to sell risk, reflective of the 0.65% drop in the US S&P 500 futures. The safe-haven US Dollar is holding the upside just above 104.00 against its major peers. This, in turn, triggers a fresh leg up in the US Treasury bond yields and continues to underpin the Greenback.