Following Fed Chair Jerome Powell’s speech last week, equities started off on a positive note.
There is a wide consensus that central banks across the world will be cutting rates. This is because of the global economy being hit hard due to the Coronavirus.
In the US, investors are already pricing in a prospect of a rate cut at the March FOMC meeting.
Eurozone Manufacturing Sector Contracts
The final manufacturing activity figures from IHS Markit shows a modest contraction in the sector. The final manufacturing PMI rose to 49.2 in February, up from 47.9 in January. This was a slight increase from the flash PMI numbers which signaled a reading of 49.1
EURUSD Pops Higher to a 1-Month High
The common currency surged higher on Monday, gaining over 1% on the day. Price action is testing the resistance level of 1.1193 – 1.1170. We anticipate a possible reversal at this level. This will keep prices consolidated within this resistance area and the 1.1100 level of support in the near.
UK Manufacturing Sector Maintains Expansion
The manufacturing sector in the UK saw the fastest expansion in ten months in February. The gains came on the back of continued recovery amid reduced political uncertainty.
IHS Markit’s manufacturing PMI for the UK rose from 50.0 in January to 51.7 in February.
GBPUSD Consolidates Below Support
The currency pair is trading rather flat in the medium term. Price action fell below the support area of 1.2858 level. A brief intraday decline, however, is pushing the currency back to the support.
However, this retracement will see a possible retest of 1.2858 level as resistance. There is also the bullish divergence that is building up which could see the near term upside prevailing.
ISM Manufacturing Retreats in February
Manufacturing activity in the US slowed in February. The report from ISM shows that manufacturing activity fell to 50.1, missing estimates of 50.5. This was down from 50.9 in January.
However, the index remains above the 50-level, suggesting expansion in the sector. The slowdown in activity coincides with the virus outbreak which has slowed business globally.
XAUUSD Retraces Declines
Gold prices are retracing the losses from last Friday. Price action quickly bounced back after testing the support area near the 1572 – 1569 level. Following this bounce, price action has moved higher. The current pullback to the 1594 level could see a possible continuation to the upside. The next main resistance is at 1631 level.