Morning Forex Fundamental

EUR

'We won't get an economic improvement anytime soon in Europe' - Alexander Krueger, chief economist at Bankhaus Lampe KG

Manufacturing contracts; unemployment rises to all time high

Impact High

Euro area manufacturing contracted for a seventh consecutive month, said the Institute for Supply Management on Thursday. An index measuring manufacturing activity rose to 49 in February from 48.8 in January. Above 50.0 indicates industry expansion, below indicates contraction.

In a separate report, the European statistical bureau [Eurostat] said unemployment in the 17-member bloc edged higher to 10.7 per cent in January, the highest level since the establishment of a monetary union.

'We won't get an economic improvement anytime soon in Europe,' said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. 'The first quarter will definitely be negative and there are concerns that we'll see a deeper or longer recession. Downside risks are prevailing.'

USD

'The economy is expanding, but the data is choppy and somewhat inconsistent' - John Herrmann, president of Herrmann Forecasting LLC

Unemployment claims little changed; manufacturing expands less than expected

Impact High

The number of Americans claiming for unemployment benefits declined slightly to 351 thousand in the week ended February 25 from the week before, said the Department of Labor on Thursday.

'[Jobless claims data] does add to the evidence that the economy's got more momentum than people expect and we don't think there will be more quantitative easing,' said Kevin Cummins, economist at UBS securities, Stamford, Connecticut.

U.S. manufacturing expanded in February at a slower pace than forecast, the Institute for Supply Management said on Thursday. A manufacturing gauge based on a survey of purchasing managers slid to 52.4 from 54.1 in January.

'The economy is expanding, but the data is choppy and somewhat inconsistent,' said John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey. 'The manufacturing sector is one of the key pillars of resilience and growth.'

GBP

'U.K. manufacturers continued to raise production and employment in February, building on the solid foundation seen so far at the start of 2012' - Rob Dobson, senior economist at Markit

U.K. manufacturing expands, easing recession concerns

Impact: High

U.K. manufacturing grew for a second month in February, adding to signs the economy could avoid recession this quarter. The factory gauge, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, fell to 51.2 from 52.0 in January, said Markit on Thursday.

'U.K. manufacturers continued to raise production and employment in February, building on the solid foundation seen so far at the start of 2012,' Rob Dobson, senior economist at Markit, said in the statement.

'It's clearly a little disappointing that the PMI index dropped back this month,' said David Tinsley, U.K. economist for BNP Paribas.

'It is a reminder though that the manufacturing sector's major customer remains other economies in Europe, and fairly lackluster growth there is a constraint on better performance for the sector overall.'

CHF

'The risk of a correction is very present as markets have gotten off to a strong start to the year' - Mikkel Kierkegaard Petersen, a senior equity adviser at Nordea Private Banking

Swiss stocks ended Thursday's session with a slight gain

Impact: Medium

Swiss stocks rose on Thursday, led by Adecco S.A., world leader company in the human resources. The company gained 8.5 per cent after announcing better than expected fourth quarter financial results.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, advanced 0.30%, or 18.35 points, to 6,128.28. The broader Swiss Performance Index gained 0.25%, or 14.10 points, to 5,598.42.

The Federal Statistical Office is to announce change in year-on-year retail sales on Monday. Sales rose 0.6 per cent in December, after increasing 1.8 per cent in November

JPY

'The stock markets are being swayed by the currency' - Naoki Fujiwara, a fund manager at Shinkin Asset Management Co.

Japanese stocks closed lower on Thursday

Impact Medium

Japanese stocks declined on Thursday as the yen edged higher, dimming the outlook for exporters.

The Nikkei 225 decreased 0.16%, or 15.87, to 9,707.37. The broader Topix erased 0.53%, or 4.42, to 831.54.

'The yen is driving down equities this afternoon,' said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc.

'Investors have been sensitive about overheating in the market and they are selling to lock in profits after the market digested major factors.'

Press Review

Europe

Euro area finance ministers approved a 130 billion euro bailout for Greece on February 20. The ECB allotted 529.5 billion euro to 800 lenders on Wednesday.

New wave on concerns over the ability of Greece economy to be restored has bees raised by the experts, as they regard the bailout package to be an insufficient measure.

Firewall stalemate overshadows EU summit

http://www.marketwatch.com/story/firewall-stalemate-overshadows-eu-summit-2012-03-01

European leaders begin a two-day summit meeting in Brussels Thursday night and are unlikely to come to an immediate agreement on a push by the European Union to boost the size of the region's rescue fund.

European Factors-Shares set to extend rally

http://www.reuters.com/article/2012/03/02/markets-europe-factors-idUSL5E8E206E20120302

Financial spreadbetters expect Europe's main stock indexes to rise on Friday, adding to the previous day's rally and tracking gains on Wall Street, as risk appetite continues to improve following the ECB's latest liquidity injection.

USA

Ben Bernanke on February 8 reiterated the Federal Reserve's plan to keep borrowing costs near record lows until at least late 2014, despite rapid decline in unemployment rate to 8.3%.

Upbeat data point to a robust recovery of world's largest economy.

Brazil declares new 'currency war'

http://edition.cnn.com/2012/03/02/business/brazil-currency-war/index.html?hpt=ibu_c2

Brazil has declared a fresh 'currency war' on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country's struggling manufacturers.

IMF Says Threat of Sharp Global Slowdown Eased

http://www.cnbc.com/id/46596292

The probability of a sharp global slowdown has eased due to recent policy measures adopted in the euro zone to tackle its debt crisis, the International Monetary Fund said on Thursday, but it warned risks to world growth remain 'squarely to the downside.'

Asia & Pacific

China's year-on-year foreign direct investment fell 0.3% in January to $10 billion.

Japan has published first annual trade deficit since 1980 putting into question how long the country can rely on exports to serve a huge public debt.

Oil price jumps to 43-month high on Saudi blast reports

http://www.bbc.co.uk/news/business-17229025

Crude oil prices have hit a 43-month high after reports that a pipeline exploded in Saudi Arabia, the world's biggest oil producer.

Asia's Strong Job Market May Limit Policy Easing

http://www.bloomberg.com/news/2012-03-02/asia-s-strong-job-market-may-limit-policy-easing.html

Asia's job markets are holding up even as the European crisis hurts exports, auguring stability in domestic demand that reduces the case for the region's central banks to add monetary stimulus.