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Markets consolidates in quiet session

Notes/Observations

French Q4 ILO jobless rate misses expectations but edges down q/q to 10.0%

Overnight:

Asia:

Australia Jan Employment data beats expectations but mainly due to part-time workers (Employment Change: +13.5K v +10.0Ke; Unemployment Rate: 5.7% v 5.8%e)

China Jan Foreign Direct Investment (FDI) registered its 1st decline in 27 months (CNY80.1B; -9.2% y/y). Commerce Ministry downplayed that data noting base-effects and timing of the Lunar New Year holiday

China Total holding of US Treasuries registered its 1st raise after 6 straight months of decline ($1.06T v $1.05T prior)

Bank of Japan (BOJ) Gov Kuroda: Risk of another global financial crisis has fallen a lot, but cannot deny a different kind of crisis could happen

Europe:

ECB's Weidmann (Germany): would be a mistake to roll back financial market regulation as bad loans triggered crisis

German Bundesbank's Wuermeling: FX devaluation race would only have losers

Americas:

Fed's Harker (hawk, voter): reiterates three Fed rate hikes appropriate for 2017

Fed's Dudley (dove, FOMC voter): Economy growing a little above trend. Fed to raise rates a little further in months ahead.

Fed's Rosengren (moderate, non-voter): it's likely appropriate to raise rates at least as quickly as median projections; maybe even a bit more rapidly - Fed's Bullard (non-voter, dovish): could raise rates later this year, given economic data

Energy:

Kuwait state-run National Oil Company CEO Jafar: Kuwait oil production stands at 2.75M bpd (in-line with OPEC agreement); Will raise production 0.5M bpd after cuts expire

Economic data

(FR) France Q4 ILO Unemployment Rate (miss): 10.0% v 9.8%e r; Mainland (Ex-Overseas) Unemployment Rate: 9.7% v 9.6%e v 9.7% prior

(NL) Netherlands Jan Unemployment Rate: 5.3% v 5.4% prior

(EU) Jan EU27 New Car Registrations: 10.2% v 3.0% prior

(SE) Sweden Jan Unemployment Rate: 7.3% v 7.3%e, Unemployment Rate (Seasonally Adjusted): 6.8% v 6.8%e

(GR) ECB maintains emergency liquidity assistance (ELA) cap for Greece banks at €46.3B

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €4.547B vs. €4.0-5.0B indicated range in 2022, 2027 and 2028 Bonds

Sold €2.051B in 0.4% Apr 2022 SPGB; Avg yield: 0.532% v 0.399% prior; Bid-to-cover: 1.53x v 1.36x prior

Sold €1.02B in 1.5% Apr 2027 bond; Avg yield: 1.733% v 1.450% prior; Bid-to-cover: 2.95x v 1.41x prior

Sold €1.476B in 5.15% Oct 2028 bono; Avg Yield 1.894% v 2.272% prior; Bid-to-cover: 1.67x v 1.69x prior

(FR) France Debt Agency (AFT) sold total €6.998B vs. €6.0-7.0B indicated range in 2020 and 2022 Oats

Sold €3.248B in 0.00% Feb 2020 Oat; Avg Yield: -0.34% v -0.43% prior; Bid-to-cover: 2.06x v 1.58x prior

Sold €3.750B in 0.00% May 2022 Oat; Avg yield: +0.09% v -0.04% prior; Bid-to-cover: 2.05x v 1.64x prior

(SE) Sweden sold total SEK750M in I/L 2025 and 2027 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.4% at 3,315, FTSE -0.4% at 7,273, DAX -0.2% at 11,777, CAC-40 -0.3% at 4,912, IBEX-35 -0.3% at 9,559, FTSE MIB -0.4% at 18,978, SMI -0.4% at 8,449, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading lower after a raft of corporate earnings pre-market, and a relatively mixed session in Asia overnight; shares of Schneider Electric leading the losses in the Eurostoxx after reporting worse than expected results; Banking stocks trading mixed in the index; Commodity and mining stocks trading notably lower in the FTSE 100 as copper prices trade lower intraday, energy stocks also trading lower; shares of Nestle the notable laggard in the SMI index after releasing worse than expected results.

A plethora of upcoming scheduled US earnings (pre-market) include Alexion Pharmaceuticals, Avon Products, Build-A-Bear Workshop, Cabela's Inc, Charter Communications, Cenovus Energy, Dean Foods, Duke Energy, EnCana, EPAM Systems, Freddie Mac, Genesis Energy, GNC Holdings, Hyatt Hotel, Huntington Ingalls Industries, Himax Technologies, Laboratory Corp of America, MGM Resorts, Melco Crown Entertainment, Navigant Consulting, PBF Energy, PG&E Corp, Pool Corp, Reliance Steel and Aluminum, SCANA, Syntel, Time Inc, Tempur Sealey, The Wendy's Company, Waste Management, West Pharmaceuticals Services, Yandex, and Zoetis.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Air France AF.FR +8.0% (FY16 results), Coca-Cola HBC CCH.UK +1.2% (FY16 results), Huntsworth HNT.UK +13.0% (trading update), Laura Ashley ALY.UK -4.0% (H1 results), Nestle NESN.CH -2.2% (FY16 results), Straumann Holding STMN.CH -3.0% (FY16 results), TF1 TFI.FR +5.3% (FY16 results)]

Energy: [Fuchs Petrolub FPE.DE -0.4% (prelim FY16 results), OMV OMV.AT +0.8% (Q4 results), Petroleum Geo-Services PGS.NO -3.5% (Q4 results), REC Silicon REC.NO +8.3% (Q4 results)]

Industrials: [Cobham Plc COB.UK -19.7% (prelim FY16 results), Fincantieri FCT.IT+3.9 % (awarded order for 4 cruise ships valued at ~€3.2B), Valeo FR.FR -0.9% (FY16 results)]

Materials: [Clariant CLN.CH -1.7% (Q4 results), Imerys NK.FR +2.3% (FY16 results)]

Technology: [Cap Gemini CAP.FR +2.5% (FY16 results), Kudelski KUD.CH -5.3% (FY16 results), Schneider Electric SU.FR -4.2% (FY16 results)]

Telecom: [Telenet TNET.BE +2.6% (FY16 results)]

Speakers

Italy Fin Min Padoan: Financial Transaction Tax (Tobin tax) was not on the agenda at this time

EU's Moscovici reiterated that an agreement on Greece bailout review was needed and could be reached

German CDU Parliamentary leader Kauder: Greece aid only possible with IMF participation

French prosecutors: Police had finalized its preliminary probe on Fillon; saw no reason to drop investigation at this time

Japanese Bankers Association Chairnan Kunibe: US economy and rising interest rates were factors for weaker JPY currency (Yen); not the BOJ policy

Russia Energy Min Novak: To cut oil production by 300K bps by May/Jun period. Saw Feb-Mar production cuts ahead of schedule

Currencies

USD retraced some of its recent gains Treasury yields came off its highs. The greenback did seen some traction after Wed's 2nd round of somewhat more hawkish Fed chair Yellen testimony, along with hotter CPI and retail sales data out of the US. The data helped to raise the prospect of a rate increase by the Fed soon

USD/JPY dipped to 113.60 area. Dealers were noticing some comments from Bank of Japan (BOJ) Gov Kuroda in which he noted that low interest rates could sow the seeds of a new financial crisis

Fixed Income:

Bund futures tradeat 163.52 up 21 ticks retracing off lows as European indices give back some of the weeks gains. A continued move higher targets 163.64 initially followed by 164.07, 164.46 then 164.94. Support moves to yesterday low of 163.13 then 162.92 followed by 162.44.

Gilt futures trade at 125.32 up 11 ticks drifting higher inline with Bunds. Resistance remains just above highs at 125.56 followed by 125.90 then 126.28. Support remains at 124.91 followed by 124.46. Short Sterling futures continue to trade flat with Jun17Jun18 trading 18/19bp.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.328T up €4B from €1.324T prior. Use of the marginal lending facility falls to €137M from €3M prior.

Corporate issuance saw $5.65B come to market via 4 issuers headlined by Philip Morris $2.5B 4 part offering, and Mitsubishi UFJ 3 part $2.5B offering. Weekly issuance pushes above $22B, with Monthly issuance above $47B.

Political/In the Papers:

Britain said to be preparing to ask for substantial share of €150B assets from EU in attempt to cut cost of Brexit divorce bill while EU's chief negotiator Barnier also said to be preparing a list of up to €60B of liabilities

Looking Ahead

(ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave all key rates unchanged

(BR) Brazil Feb CNI Industrial Confidence: No est v 50.1 prior

(EG) Egypt Central Bank Interest Rate Decision; Expected to leave Deposit Rate unchanged at 14.75%

05:30 (BR) Brazil Dec Economic Activity Index (Monthly GDP) M/M: -0.2%e v 0.2% prior; Y/Y: -1.7%e v -2.0% prior

05:30 (HU) Hungary to sell Bonds (3 tranches)

05:30 (PL) Poland to sell Bonds

05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.5B in new 0.10% March 2028 I/L Bonds (Oatei) (no history)

06:00 (IL) Israel Q4 Advance GDP Annualized: 3.7%e v 3.6% prior

06:00 (CZ) Czech Republic to sell Bills - 07:30 (EU) ECB account of the monetary policy meeting (Jan Minutes)

08:00 (RU) Russia Jan Industrial Production Y/Y: 3.0%e v 3.2% prior

08:00 (RU) Russia Gold and Forex Reserve w/e Feb 10th: No est v $394.1B prior

08:00 (PL) Poland Jan Employment M/M: 1.2%e v 0.1% prior; Y/Y: 2.8%e v 3.1% prior

08:00 (PL) Poland Jan Average Gross Wages M/M: -7.7%e v 7.1% prior; Y/Y: 4.3%e v 2.7% prior

08:00 (AT) EU's Moscovici and ECB's Nowotny (Austria) participate on panel in Vienna

08:15 (UK) Baltic Dry Bulk Index - 08:30 (US) Jan Housing Starts: 1.226Me v 1.226M prior; Building Permits: 1.230Me v 1.228M prior (revised from 1.210M)

08:30 (US) Initial Jobless Claims: 245Ke v 234K prior; Continuing Claims: 2.05Me v 2.078M prior

08:30 (US) Feb Philadelphia Fed Business Outlook: 18.0e v 23.6 prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds

09:00 (BR) Brazil to sell 2017, 2019 and 2020 LTN Bills

10:30 (US) Weekly EIA Natural Gas Inventories

13:00 (US) Treasury to sell 30-Year TIPS

News and Events:

USD unable to hold ground as yields ease

Despite the release of mostly upbeat economic data from the US yesterday, the greenback was unable to lock-in the gains and quickly reversed momentum. EUR/USD eased to 1.0521 as January’s headline inflation surged to 2.5%y/y versus 2.4% expected and 2.1% in December. Similarly, the core measure, which excludes the most volatile components, rose to 2.3%y/y versus 2.1% expected. Still on the bright side, after slowing during the four previous month, core retail sales jumped 0.7%m/m, while the market was expecting a reading of 0.3%. Retail sales were quite disappointing in the last quarter of 2016 and raised questions about the health of the US economy as personal consumption remains the number one driver of the world’s largest economy. The January figures bode well for the first quarter of 2017, should the trend continue.

On a less positive note, industrial production printed well below the median forecast as it contracted 0.3%m/m in January, while the market was expecting a flat reading. In addition, the December figure was downwardly revised to 0.6% from 0.8% initially estimated. This data contrasts sharply with the recent survey that suggested an upbeat mood in the manufacturing industry. Indeed, the manufacturing PMI together with the ISM manufacturing has been on solid footing since the end of the September quarter last year. This strong divergence suggests that the sector needs more than Trump’s boundless optimism to lift its head above the water.

On the technical side, the dollar index failed to break the 101.45-53 strong resistance area (50dma and Fibonacci 50% on January debasement) and has since then broke the 38.2% level. However, the index is still trading with a positive momentum as a break of the 99 level area is needed to confirm a trend reversal.

ECB minutes in focus

Early this afternoon, the ECB will release its account of the monetary policy meeting that was held on the 19th of January in Frankfurt.

Usually ECB minutes do not reveal much but today we hope to gain some insight on the current QE programme as well as on the diverging views amongst policymakers. Indeed, views on European uncertainties are definitely strong even though those same uncertainties are clearly helping the ECB by lowering the single currency’s value.

We will also closely monitor inflation expectation development which is now running at 1.1% and is expected to rise towards 1.4% at the end of the year. The ECB is very conservative in its approach as it intends to see inflation rise towards the 2% target by 2020. In any case, Eurozone reflation will be the yardstick of the ECB’s monetary policy this year.

Stay vigilant during risk rally

Market participants can feel the unleashed “animal spirit” driving global stock prices higher. For five consecutive days the financial world has been blasting news of stock prices new all-time highs. US P/E estimates have expanded to accommodate higher EPS on Trump tax reforms. While solid corporate earnings, (70% of US names have beat forecasts), provide clear justification for the broad-based optimism, it’s hard to find an asset not improving as even safe-haven gold is finding buyers to $1237, preparing to test the $1245 range high. However, we remain slightly concerned over the current round of exuberance. First is our negative expectation from the Trump administration. Despite bi-partisan support for tax reforms Trump’s divisive nature could easily derail the positive pro-growth policy. Trump's first 30 day have been plagued by mis-management and bad decisions, a trend unlikely to change given his “bull in a china shop” personality. Secondly, risk measures in Europe are quietly hinting at rising worries. EURCHF 3-month vol and risk reversal have spiked in recent days and have yet to normalize. The short-term spread between German and peripheral countries are re-widening. Despite the optimistic European data, the exception being the disappointing GDP read, the sell-off in all bonds not German hints of creeping uncertainty. Clearly the primary sources are the rapidly approaching Dutch and French elections. Spreads between German and French 10-year yields are now at the widest level since 2012. Given our current doubt we would remain short EURCHF heading into this period of US and European political insecurity. In addition we see short EURPLN as a solid strategy heading into the Dutch parliamentary elections at Geert Wilders of the populist Freedom Party still holds the lead.

Today's Key Issues (time in GMT):

• Jan Unemployment Rate, exp 7,30%, last 6,50% SEK / 08:30
• Jan Unemployment Rate Trend, last 6,90% SEK / 08:30
• Jan Unemployment Rate SA, exp 6,80%, last 6,90% SEK / 08:30
• Dec Trade Balance EU, last 235m, rev 222m EUR / 09:00
• Dec Trade Balance Total, last 4203m, rev 4190m EUR / 09:00
• Feb 15 FGV CPI IPC-S, exp 0,52%, last 0,61% BRL / 10:00
• Dec Economic Activity MoM, exp -0,20%, last 0,20% BRL / 10:30
• Dec Economic Activity YoY, exp -1,65%, last -2,02% BRL / 10:30
• Feb 10 Foreigners Net Bond Invest, last $170m TRY / 11:30
• Feb 10 Foreigners Net Stock Invest, last $349m TRY / 11:30
• Fed's Fischer Speaks in interview on Bloomberg TV USD / 11:30
• ECB account of the monetary policy meeting EUR / 12:30
• Feb 10 Gold and Forex Reserve, last 394.1b RUB / 13:00
• EU's Moscovici, ECB's Nowotny on panel in Vienna EUR / 13:00
• Jan Housing Starts, exp 1226k, last 1226k USD / 13:30
• Jan Housing Starts MoM, exp 0,00%, last 11,30% USD / 13:30
• Jan Building Permits, exp 1230k, last 1210k, rev 1228k USD / 13:30
• Jan Building Permits MoM, exp 0,20%, last -0,20%, rev 1,30% USD / 13:30
• Feb 11 Initial Jobless Claims, exp 245k, last 234k USD / 13:30
• Feb 4 Continuing Claims, exp 2050k, last 2078k USD / 13:30
• Feb Philadelphia Fed Business Outlook, exp 18, last 23,6 USD / 13:30
• ECB's Coeure Speaks in Maastricht EUR / 14:00
• Feb 12 Bloomberg Consumer Comfort, last 47,2 USD / 14:45
• Feb Bloomberg Economic Expectations, last 56 USD / 14:45
• Fed's Williams Speaks About Fintech in San Francisco USD / 20:10
• Jan BusinessNZ Manufacturing PMI, last 54,5 NZD / 21:30
• 4Q Retail Sales Ex Inflation QoQ, exp 1,00%, last 0,90% NZD / 21:45
• Jan Industrial Production YoY, exp 3,00%, last 3,20% RUB / 23:00
• Jan Tax Collections, exp 137290m, last 127607m BRL / 23:00

The Risk Today:

EUR/USD's selling pressures continue despite ongoing consolidation after the pair has broken strong hourly support given at 1.0581 (16/01/2016 low). The road is wide open towards support at 1.0454 (11/01/2017 low). Expected to see continued decrease. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD is still trading below strong resistance given at 1.2771 (05/10/2016 high). The technical structure suggests that the pair should back bouncing lower towards support given at 1.2254 (19/01/2016 low). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY is pushing higher after its increase from support given at 111.36 (28/11/2016 low). However, bearish pressures arise around hourly resistance given at 115.62 (19/01/2016 high). The technical structure suggests that the medium-term momentum is bearish. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF's short-term bullish momentum is pausing after the breakout of the downtrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). Nonetheless, we believe that the road is nonetheless clearly wide-open for further decline if the pair gets back below parity. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USDJPY's rally since early February indicates that the correction from the 2016-peak (118.66) made on December 15 is ended at 111.57 on February 7. We remain bullish over the currency pair (i.e. expecting Japanese yen to weaken against US dollar). As we mentioned in our January report, reflation trade, driven by US President Donald Trump's pro-growth policy, such as infrastructural spending, tax cut and deregulations, has driven USD's rally against major currencies since Trump's victory. Hopes that the measures would drive US growth and inflation have lifted speculations on Fed funds rate hikes this year, sending Treasury yields and USD higher. Meanwhile, BOJ's yield curve targeting policy, announced in September last year, would keep the 10-year JGB yields close to 0%. These would help accelerate divergence of Japanese yields from those in the US, pressuring Japanese yen. Recent developments appear to have reinforced such conviction.

Trump-Abe Summit and BOJ policy

The market was apparently relieved after the meeting between US President Donald Trump and Japanese Prime Minister Shinzo Abe on February 10. Traders were once concerned about a politically-triggered Japanese yen appreciation. Yet, there was no touch on trade imbalances or exchange rate. Abe confirmed on Wednesday (Feb 15) that Trump did not complain about the weakness in yen and BOJ's yield curve control policy. As he spoke before the upper house, Abe noted that 'Trump shared the view that our monetary policy is not for currency manipulation but for ending deflation". We also notice that BOJ has strengthened its tone on monetary easing following the summit. Governor Haruhiko Kuroda noted that there remains "considerable distance to the 2% price stability target' and affirmed that he stood ready to cut interest rates if the economy worsens. Indeed, BOJ bought 9.7 trillion yen (book value) of JGBs in January, up from 9.4 trillion yen a month ago. The average maturity of JGB purchased in January was 8.3 years. BOJ's shares in the JGB market rose to another record of 41.8% in value terms last month. This is evidence of the central bank's commitment to the yield curve targeting policy. Kuroda's recent remark on the exchange rate was marked by the comments that 'currency rates move on various factors… It's wrong to think currency rates move by monetary policy alone".

Janet Yellen's Testimony

Fed Char Janet Yellen's two-day Congressional testimony was viewed as a modestly hawkish one, fueling expectations for a March rate hike. Indeed, following her second day testimony, the OIS has priced in a 48% of rate hike next month, up from 37% a few days ago, while Bloomberg's estimate has suggested a 42% chance, up from 30% previously. While reiterating that all meetings are 'live' for a rate hike, Yellen warned that waiting too long to remove accommodation would be unwise'. She also emphasized that the Fed's monetary policy stance is not based on 'speculations' about fiscal policy. The policy decisions have been driven by the economy's 'solid progress'. According to Yellen, 'incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to +2%, consistent with the Committee's expectations'. At the upcoming meetings, policymakers would 'evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate'.

We expect expectations for a looser US fiscal policy, together with a tighter monetary policy, would support USDJPY. We are monitoring market developments and look to upgrade our USDJPY forecasts in coming weeks. Risks to our bullish outlook include BOJ's tapering and lifting of its yield target, as well as improvement in Japanese economic outlook.

The Aussie is attempting to sustain break above key barrier at 0.7700 which capped upside attempts in past two weeks.

Yesterday's marginal close above 0.7700 barrier and today's extension to fresh seven-weeks high at 0.7730, could be seen as strong bullish signals.

Repeated close above 0.7700 is needed to confirm break and open way towards next strong barriers at 0.7755/75 zone (Aug/Nov 2016 congestion tops).

Strong bullish setup of daily studies supports further upside action, however, rally may show signs of stall ahead of 0.7755/75 barriers as daily RSI / slow stochastic are approaching overbought zone.

Session low at 0.7690 marks initial support, with rising daily Tenkan-sen that tracks the uptrend (currently at 0.7667), expected to ideally contain dips.

Res: 0.7730, 0.7755, 0.7775, 0.7800
Sup: 0.7690, 0.7667, 0.7635, 0.7616

Pullback from yesterday's strong upside rejection at 115.00 barrier (55SMA) extends today and probes below pivots at 113.65/60 (Fibo 38.2% of 111.57/114.94 upleg / daily Kijun-sen).

Break here would generate stronger bearish signal for further easing.

Yesterday's bearish candle with long upper shadow weighs, along with slow stochastic that reversed from o/b territory and showing plenty of room at the downside.

Near-term risk is turning towards next pivot at 113.26 (daily Tenkan-sen / 50% retracement), loss of which would confirm reversal and open targets at 112.86/37 (Fibo 61.8% and 76.4% of 111.57/114.94 upleg).

Hourly Ichimoku cloud (spanned between 113.90 and 114.15) is expected to cap upside attempts and guard upper pivot at 115.00.

Res: 113.90, 114.15, 114.29, 115.00
Sup: 113.54, 113.26, 112.86, 112.37

Near-term focus turned higher again, following yesterday's strong downside rejection that confirmed false break into daily cloud.

Today's extension of strong bounce from 1.2382 (yesterday's spike low) also completed inverse H&S pattern on hourly chart that signals further upside.

Fresh gains approach 1.2500 pivot (also broken bull-trendline off 1.1986 low) that marks a trigger for renewed attack at key 1.2550 zone barriers.

Daily 55 / 100 /30 SMA's at 1.2426/17 zone remain key near-term supports, together with daily cloud top at (currently at 1.2404).

Bullish near-term bias is expected to stay in play while the price holds above these supports.

Res: 1.2500, 1.2550, 1.2580, 1.2619
Sup: 1.2452, 1.2426, 1.2404, 1.2382

Yesterday's strong downside rejection that left long-tailed daily candle signals extended consolidation / correction before larger bears resume.

Fresh extension of bounce from 1.0520 low probes above initial barrier at 1.0600 (55SMA), above which would signal stronger correction of 1.0827/1.0520 downleg.

Slow stochastic emerged from o/s territory and supports this scenario.

Good resistances that lay at 1.0641 (Fibo 38.2% of 1.0827/1.0520) and 1.0666 (10/30SMA bear-cross) should limit corrective action.

Upper breakpoint lies at 1.0695 (20SMA), break of which would signal an end of correction from 1.0827 (02 Feb high)

Res: 1.0640, 1.0666, 1.0695, 1.0737
Sup: 1.0600, 1.0559, 1.0520, 1.0454

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'Continued moderate growth in employment has led to a new high in the total employment rate, while the rate for women has reached 70pc for the first time on record. Overall, the labour market appears to be edging towards full capacity.' - David Freeman, ONS

The number of Britons filing for unemployment benefits dropped markedly last month, while wage growth slowed in the Q4. The Office for National Statistics reported on Wednesday the number of claimants declined 42,400 to 787,400 in January, following the preceding month's upwardly revised fall of 20,500. In the meantime, including bonuses, average hourly earnings climbed 2.6% on an annual basis in the Q4 of 2016, while analysts expected an unhanged reading from the prior month, when the Average Earnings Index rose 2.8%. Excluding bonuses, earnings advanced 2.6%, falling behind analysts' expectations for a 2.7% climb. Wage growth is closely followed by the Bank of England in the wake of the Brexit vote, as an acceleration in pay growth amid higher inflation could force the Bank to raise interest rates. Inflation rose 1.6% in the 12 months to December 2016. Nevertheless, analysts say they do not expect wage growth to pick up in the upcoming months. Wednesday's data also showed the unemployment rate held steady at its 11-year low of 4.8% during the final quarter of 2016, in line with economists' forecasts. The data suggests that the labour market was not affected by the June 23 referendum; however, the 2017-year outlook remains ambiguous. The number of foreign workers in Britain declined 9,000 on a quarterly basis in the Q4.

'The U.S. economy has quite a bit of momentum as the year began. This morning's reports add a little more impetus for the Fed to move this quarter. Still not our call but it is becoming very interesting'. - Jennifer Lee, BMO Capital Markets

US consumer prices posted the largest increase since February 2013 last month amid higher gasoline prices, keeping the Federal Reserve on course to raise interest rates further this year. The US Commerce Department reported on Wednesday its headline CPI climbed 0.6% month-over-month in January, while analysts expected the Index to remain unchanged from the prior month at 0.3%. Excluding volatile items, core consumer prices rose 0.3% last month, after growing 0.2% in December. The January inflation jump was mainly driven by higher gasoline, apparel and motor vehicles prices. On Tuesday, the Fed Chair Janet Yellen said the Bank would probably raise rates at its next policy meeting. Other data released by the Commerce Department on Wednesday showed retail sales advanced 0.4% in January after surging 1.0% in the previous month. However, analysts anticipated an increase of just 0.1% in the reported month. Furthermore, data showed core retail sales climbed 0.8% last month, following December's upwardly revised increase of 0.4%. A 1.6% rise in sales at electronics and appliances stores, the largest since June 2015, contributed the most to retail sales growth in January. Back in December, these stores posted a 1.1% drop in sales. In the meantime, automobile sales dropped 1.4%, the largest fall since March 2016, last month after surging 3.2% in December.

'Overall, the consensus-beating figures today, combined with the revisions, should have growth in Q4 tracking close to two per cent. That should remove further the possibility of a near-term ease from the BoC, despite its continuing dovish bias'. -Nick Exarhos, CIBC

Canadian manufacturing sales rose for the second consecutive month in December, official figures showed on Wednesday. According to Statistics Canada, sales advanced 2.3% on a monthly basis in December, the largest increase since 2015, following the preceding month's upwardly revised gain of 2.3% and surpassing analysts' expectations for an increase of 1.4%. In volume terms, manufacturing sales climbed 2.3% in the reported month, suggesting the Canadian economy performed well in the final quarter of 2016. Transportation sales jumped 7.4% in December, mainly driven by gains in the vehicle parts and assembly industries. Sales in the petroleum and coal product industry were up 11.6% amid the return of refineries from autumn maintenance. Wednesday's data showed sales increased in eight out of 21 industries. In the meantime, inventories posted a third straight monthly decline of 0.3% in December, whereas new orders dropped 0.6%. Low-commodity prices and the Alberta wildfires dampened economic growth during the first three quarters of 2016. However, analyst suggest that the economy managed to fully recover by the end of the past year. The weaker Loonie, which dropped around 25% against the Greenback over the past five years, helped manufacturers offset low commodity prices.