Dollar surges broadly today as US markets are back from holiday. There is finally some support from hawkish Fedspeaks. Philadelphia Fed president Patrick Harker is quoted today saying that he would "not take March off the table" for rate hike. He maintained that three hikes this year is "appropriate" depending on developments. Cleveland Fed president Loretta Mester said the trend in inflation is "moving up". And, she’s "comfortable" that inflation is moving towards Fed’s target. And, it the economy keep on with the currency way, she’s "comfortable" for a rate hike at this point. Technically, EUR/USD is heading back to 1.0520 temporary low and break would drag the pair lower. That would correspond to 101.60 resistance in dollar index.

Eurozone PMIs beat expectations

Eurozone PMI manufacturing rose 0.3 pts to 55.5 in February, above expectation of 55.0. Eurozone PMI services rose to 55.6, up from 53.7 and beat expectation of 53.7. Germany PMI manufacturing rose to 57.0, up from 56.4, above expectation of 56.0. Germany PMI services rose to 54.4, up from 53.4, beat expectation of 53.6. France PMI manufacturing, however, dropped to 52.3, up from 53.6, below expectation of 53.5. France PMI services rose to 56.7, up from 54.1, above expectation of 56.0. Markit noted that "the pace of Eurozone economic growth improved markedly to hit a near six-year high in February." And, "job creation was the best seen for nine and a half years, order book growth picked up and business optimism moved higher, all boding well for the recovery to maintain strong momentum in coming months."

Also from Europe, UK public sector net borrowing dropped to GBP -9.8b in January. Swiss trade surplus widened to CHF 4.73b in January.

Japan PMI manufacturing hit 3-year high

Japan PMI manufacturing rose to 53.5 in February, up from 52.7 and beat expectation of 52.1. That’s also the highest level since March 2014. Markit noted that "Japan’s manufacturing engine shifted into a higher gear during February, as faster increases in output, new business and employment were reported." And, "encouragingly, with backlogs of work accumulating for the first time in 14 months, the added pressures on capacity should ensure growth will be maintained at a solid pace during at least the first half of this year." Also from Japan, all industry activity index dropped -0.3% mom in December, below expectation of -0.2%.

RBA minutes: cautious over subdued household consumption

RBA minutes for the February meeting contained little news. Indeed, it reinforced our view that the central bank would leave the monetary policy unchanged for the rest of the year. The market currently prices in further rate cut this year, followed by rate hike in 2018. The central bank acknowledged the -0.5% GDP contraction in 3Q16. While attributing most of the weakness to temporary factors including ‘disruptions to coal supply and bad weather’, policymakers also warned that ‘slower growth in consumption had also been a factor’. However, they assured that such weakness should not have continued into 4Q16. On the growth outlook, the central bank suggested that ‘GDP growth was expected to pick up to around +3% in year-ended terms later in 2017, and to remain above estimates of potential growth over the rest of the forecast period’. More in RBA Minutes: Cautious Over Subdued Household Consumption

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0597; (P) 1.0615 (R1) 1.0627; More…..

EUR/USD drops sharply today but stays above 1.0520 temporary low. Intraday bias remains neutral first and outlook is unchanged. With 1.0713 minor resistance intact, we’re holding on to our bearish view. That is, corrective rise from 1.0339 has completed at 1.0828 already. Below 1.0520 will target 1.0339 first. Break will extend the larger down trend to parity. However, above 1.0713 will dampen our view and turn focus back to 1.0828 instead.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update