• PMI weak release reinforces our view that the US economy is experiencing a slowdown although we do not believe yet that it is on the edge of a recession as it could be just a temporary setback
• EUR/USD 1.0965-1.0977 levels should continue to support it while on the upside, a first resistance can be found at 1.1050 then at 1.1150
• USD/JPY should remain above 111 as the market cannot find any good reason to send the yen higher; after all the BoJ is still expected to further ease its monetary policy.
• In Australia, expected annual private capital expenditure fell sharply, reaching the lowest level in nine years as Australian non-mining companies cut spending unexpectedly
• The Mexican peso keeps struggling with crude oil at its record low, it seems obvious that Mexico must find another source of revenue as investments on oil have sharply declined
• Today’s data, current account balance, will be released and is set to remain in deficit at around 8 billion dollar. We are clearly bullish on the USDMXN which should head back towards 19.00

The release of disappointing US data on Wednesday helped EUR/USD to stabilise above the 1.10 threshold. Market services PMI fell below the 50 mark, which indicates that the sector contracted compared to the previous month, as it printed at 49.8 versus 53.5 previous reading and median forecast. This is the first time in more than two years that the sector shrank. It was a close call for the Composite PMI as it printed just above the 50 mark at 50.1, down from 53.2 in January. This weak release reinforces our view that the US economy is experiencing a slowdown as the global demand remains subdued and uncertainty about the outlook keeps rising. However, we do not believe yet that the US economy is on the edge of a recession as it could be just a temporary setback. From a technical standpoint, the 1.0965-1.0977 levels (Fibonacci 67.8% on Jan.-Feb rally and 50dma) should continue to support EUR/USD. On the upside, a first resistance can be found at 1.1050 (previous high and Fibo. 50%), then a second one lies at 1.1150.

USD/JPY rose 0.64% in the early Asian session before returning quickly to 112 global sentiment struggles to take-off. On Wednesday, the pair tested the 111 support for the first time since February 11th. The pair should remain above that level as the market cannot find any good reason to send the yen higher; after all the BoJ is still expected to further ease its monetary policy. On the upside, a resistance lies at 133.39 (high from February 22nd), then 114.87 (high from February 16th).

Crude oil prices fell slightly overnight after surging roughly 6% in Wall Street. The West Texas Intermediate was off 0.78%, to $31.90 a barrel, while its counterpart from the North Sea, the Brent crude, fell 0.58% to $34.21.

In Australia, expected annual private capital expenditure fell sharply, reaching the lowest level in nine years as Australian non-mining companies cut spending unexpectedly. As a result, the Australian was sold-off in Sydney with AUD/USD falling 0.20% to 0.7160. We would be surprised if the pair returned to January’s lows at around 0.6850.

On the equity market, most of Asian regional markets followed Wall Street’s weak positive lead – the S&P 500 was up 0.44%, the Nasdaq 0.87% and the Dow Jones 0.32%. However, mainland Chinese equities were trading massively lower after surging more than 10% since the end of January. The Shanghai and Shenzhen Composite fell 6.41% and 7.34% overnight, while offshore Hong Kong’s Hang Seng slid 1.64%. Elsewhere, equities were broadly trading in positive territory with Japanese shares rising more than 1% – Nikkei was up 1.41% and the Topix jumped 1.79% – while Taiwan’s Taiex surged 1%. In Europe, equity futures are pointing toward a higher open as the positive mood spreads. US futures are mixed.

***Yann Quelenn, market analyst: “Mexico: Peso’s weakness is not over: The Mexican peso keeps struggling as it went from below 15 peso for one single dollar note early 2015 to above 19 a few days ago.  Lingering oil prices have contributed to weakening the currency as less revenues come from oil but it is also true that the share of total government revenue from the commodity has declined, over the past twelve years, by one third to 20% from 34%. We firmly believe that there is one specific reason for this. Mexican’s infrastructure to produce oil and the state-owned companies have not been able to make sufficient investments which has prevented Mexico from gaining competitiveness over the past decade. Now that crude oil is at record low, it seems obvious that Mexico must find another sources of revenue as investments on oil have sharply declined.

Today’s data, current account balance, will be released and is set to remain in deficit at around 8 billion dollar. Export revenues are clearly not sufficient to offset import needs. As a result, CPI jumped to 10-month high in early February. Last but not least, retail sales decreased strongly in December at -1.6% m/m from 0.5% in November. We are clearly bullish on the USDMXN which should head back towards 19.00.”***

Today traders will be watching PPI and GDP from Spain; industrial output from Switzerland; PPI from Sweden; business confidence and retail sales from Italy; PPI from South Africa; private consumption, government spending, export, import and business investment from UK; CPI from the euro zone; unemployment rate and tax collection from Brazil; CPI and gold & Forex reserve from Russia; initial jobless claims, durable goods orders; FHFA house price; trade balance from New Zealand (in the evening).