GBP/USD has posted losses in Friday trade. Currently GBP/USD is trading at 1.2220. On the release front, British Services PMI dipped to 53.3, short of the estimate of 54.4 points. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate move has soared to 80%, compared to 33% just a few days ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't need to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

The pound's troubles continue, as the currency has fallen 1.4 percent this week. Earlier on Friday, GBP/USD dropped to a low of 1.2214, marking its lowest level since January 17. The pound has responded negatively to this week's key PMI reports. Manufacturing and Services PMIs both missed expectations, and Construction PMI continues to point to weak expansion. The softer Services PMI reflects more cautious spending by British consumers, who remain concerned about the ramifications of Brexit on the economy and their pocketbooks.

USD/CAD continues to head lower in the Friday session. Currently, the pair is trading at 1.3420. On the release front, there are no Canadian releases on the schedule. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

It's been a week to forget for the Canadian dollar this week, as USD/CAD has gained 2.2 percent. The pair has punched above the 1.34 line, as the Canadian dollar has slipped to its lowest level since January 4. Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate move has soared to 80%, compared to 33% just a few days ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't plan to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

There were no surprises from the Bank of Canada this week, which held rates at 0.50%, where they have been pegged since July 2015. However, the rate statement expressed concern, stating that the economy faces "significant uncertainties", including a lack of clarity over Donald Trump's economic agenda. Trump has called for the NAFTA trade agreement to be scrapped, although he has since backtracked and said that he only wanted to "tweak" the provisions that affect Canada-US trade. Still, Trump's protectionist leanings could hurt the Canadian economy, which sends 80% of its exports to its southern border. Even if NAFTA is left alone, the US could slap import duties on Canadian products, which would have negative ramifications for the Canadian economy.

Daily Pivots: (S1) 1.2235; (P) 1.2271; (R1) 1.2301; More...

GBP/USD's fall from 1.2705 is still in progress and intraday bias remains on the downside for 1.1946/86 support zone. The consolidation pattern from 1.1946 has possibly completed at 1.2705. Break of 1.1946 will confirm our bearish view and resume the larger down trend. Nonetheless, on the upside, above 1.2382 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 1.0094; (P) 1.0120; (R1) 1.0157; More.....

Intraday bias in USD/CHF remains cautiously on the upside for the moment. Rebound from 0.9860 is resuming and would target a test on 1.0342 high. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. On the downside, break of 1.0008, however, will indicate completion of the rebound from 0.9860. And intraday bias will be turned back to the downside for 0.9860.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Daily Pivots: (S1) 113.86; (P) 114.22; (R1) 114.77; More...

USD/JPY is still bounded below 114.94 resistance and intraday bias stays neutral first. Outlook is unchanged. Price actions from 118.65 are viewed as a corrective move. Firm break of 114.94 resistance will indicate that it's completed, on a double bottom pattern (111.58, 111.68). In such case, intraday bias will be turned to the upside for retesting 118.65. Also, the whole rise from 98.97 is likely resuming. On the downside, in case of another fall, we'd still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

GBP/USD has posted losses in Friday trade. Currently GBP/USD is trading at 1.2220. On the release front, British Services PMI dipped to 53.3, short of the estimate of 54.4 points. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The Fed Rate Monitor Tool (Investing.com) is currently pricing a move at 82%, compared to 18% just a week ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't need to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

The pound's troubles continue, as the currency has fallen 1.4 percent this week. Earlier on Friday, GBP/USD dropped to a low of 1.2214, marking its lowest level since January 17. The pound has responded negatively to this week's key PMI reports. Manufacturing and Services PMIs both missed expectations, and Construction PMI continues to point to weak expansion. The softer Services PMI reflects more cautious spending by British consumers, who remain concerned about the ramifications of Brexit on the economy and their pocketbooks.

Global stocks were pressured during Friday's trading session, as scepticism over the sustainability of the Trump-fuelled market rally and a sense of caution ahead of Yellen's speech kept investors on edge. Asian equity markets swiftly surrendered gains, while European shares descended into red territory as participants re-evaluated the likelihood of higher US interest rates. The bearish domino effect from Europe, coupled with risk aversion may limit gains on Wall Street later today.

Although the stock market rally has been phenomenal this quarter, investors should remain vigilant as the bearish attributes for a selloff still linger in the background. The political risks in Europe, Brexit woes and ongoing Trump uncertainties could still trigger a wave of risk aversion. While the upside momentum may continue to elevate global stocks to gravity-defying levels, an unexpected catalyst could trigger a selloff that brings an end to the overextended market rally.

Sterling slides to seven-week low

Sterling bears were unleashed on Friday following the unexpected decline in UK services in February, rekindling concerns that ongoing Brexit woes are negatively impacting the economy. The visible slowdown in UK services which fell to 53.3 has added to the cocktail of soft economic releases this week that continue to pressure Sterling. With sentiment towards Sterling firmly bearish, further downsides may be expected as anxiety heightens ahead of the Article 50 invocation this month. From a technical standpoint, the GBPUSD is heavily bearish on the daily charts and a breakdown below 1.2200 could encourage a further selloff lower towards 1.2050.

Janet Yellen in focus

The Greenback has been explosively bullish this trading week as expectations mount over the Federal Reserve raising US interest rates in March. The hawkish chorus of Fed officials suggesting an imminent US rate increase has made the Dollar king, while positive US economic data continues to ensure the currency remains buoyed. Much attention will be directed towards Yellen's speech this evening, which could cement expectations of a March rate hike if she reiterates a similarly hawkish mantra as other Fed officials.

Technical traders may pay attention to how the Dollar Index reacts around the 102.00 regions. There is a possibility that previous resistance at 102.00 could transform into a dynamic support, which in turn encourages a further incline higher towards 102.50.

Gold under fresh selling pressure

The growing speculation of the Federal Reserve raising US interest rates in March has exposed Gold to downside shocks, with the metal booking its biggest one-day loss of 2017 during Thursday's trading session. Sellers have exploited the repeated hawkish comments from Fed officials to pressure the yellow metal, while a strengthening Dollar continues to cap upside gains. A scenario where the Greenback continues to appreciate amid the improving sentiment towards the US economy could leave Gold vulnerable to further losses. Although the concerns over political risks in Europe, Brexit woes and Trump developments attract investors to safe haven assets in the medium to longer term, bears currently remain in control on the daily charts. From a technical standpoint, further weakness below $1220 could encourage a selloff lower towards $1200.

Commodity spotlight - WTI Crude

Oil markets were vulnerable to losses on Thursday following reports that Russian crude production remained unchanged in February, rekindling concerns of weak compliance in the global output cut deal. The sharp selloff was fuelled by US government data showing that domestic crude inventories ascended to record highs last week. Oil prices may come under increased pressure from the combination of oversupply fears resurfacing, US shale pumping oil incessantly and a strengthening Dollar. From a technical standpoint, the breakdown below $53 on WTI Crude may open a path lower towards $52.

Daily Pivots: (S1) 1.0550; (P) 1.0590 (R1) 1.0616; More.....

EUR/USD recovers ahead of 1.0493 after forming a temporary low at 1.0494. Intraday bias remains neutral as the pair is still bounded in range of 1.0493/0630. Overall near term outlook stays bearish with 1.0630 resistance intact. Downside breakout is expected sooner or later. Fall from 1.0828 is resuming the larger down trend. Below 1.0493 will target 1.0339 low first. Break will confirm our bearish view and target parity. However, break of 1.0630 will dampen our view and turn focus back to 1.0828 resistance 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.

Dollar stays firm against most major currencies on speculations of Fed March hike. Nonetheless, the greenback trades lower against Euro as EUR/USD defended 1.0493 near term support. Fed fund futures are pricing in more than 77% chance of a March hike after a wave of hawkish comments from Fed officials. The focus will now turn to Fed chair Janet Yellen's speech, as well as that of vice chair Stanley Fischer today. Traders would be eager to get confirmation on their expectations. Meanwhile, next Friday's non-farm payroll report could be the final piece of data policymakers would watch before FOMC meeting on March 14/15.

UK services growth slowed

Sterling weakens against Euro today after weaker than expected services data. UK PMI services dropped to 53.3 in February, down from 54.5 and missed expectation of 54.0. Markit noted that "UK service sector firms remained in expansion mode during February, but growth momentum eased further from the 17-month peak seen at the end of 2016." And, "the slowdown mainly reflected a softer pace of new business growth, which some respondents linked to more cautious spending among consumers." At the same time, Markit chief business economist Chris Williamson said that "inflationary pressures remained the highest for six years as firms struggled with rising costs associated with the weak pound, but optimism about the year ahead remained elevated by recent standards."

Also released from Europe, Eurozone retail sales dropped -0.1% mom in January. Services PMI was revised down to 55.5 in February. Germany services PMI was finalized at 54.4 in February. German retail sales dropped -0.8% mom in January. France services PMI was revised down to 56.4 in February. Italy services PMI rose strongly to 54.1 in February.

Japan CPI ticked up in January

Japan national CPI core rose to 0.1% yoy in January, up from -0.2% yoy, above expectation of 0.0% yoy. That's also the first uptick in 11 months. Tokyo CPI core, however, dropped -0.3% yoy in February, unchanged from prior month's reading, and missed expectation of -0.2% yoy. The jump in National CPI core is seen mostly as a recent of energy prices. There is still no clear evidence of momentum in underlying inflation, including wages. And, the reading is still far below BoJ's 2% target. It's difficult for BoJ to start scaling back the massive monetary stimulus any time soon. Unemployment rate dropped 0.1% to 3.0% in January. Household spending dropped -1.2% yoy. Consumer confidence dropped 0.1 to 43.1 in February.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0550; (P) 1.0590 (R1) 1.0616; More.....

EUR/USD recovers ahead of 1.0493 after forming a temporary low at 1.0494. Intraday bias remains neutral as the pair is still bounded in range of 1.0493/0630. Overall near term outlook stays bearish with 1.0630 resistance intact. Downside breakout is expected sooner or later. Fall from 1.0828 is resuming the larger down trend. Below 1.0493 will target 1.0339 low first. Break will confirm our bearish view and target parity. However, break of 1.0630 will dampen our view and turn focus back to 1.0828 resistance 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

Friday March 3: five things the markets are talking about

U.S economic data continues to be bullish and above expectations, coupled with the most recent comments from Fed officials this week are supporting growing expectations of a rate hike in a fortnight by the Fed.

Expect Fed Chair Yellen's speech today (01:00 pm EST) to be highly scrutinized. Her remarks are likely to further shape market expectation toward a rate increase. Should Yellen signal to wait a bit longer to act, in other words, deflate expectations on an imminent increase then this Friday afternoon of trading will be rather frantic.

The macro backdrop supports the Fed's plan of a moderate increase in its short-term interest rates - the U.S labor market nears full employment and inflation readings are either above the Fed's 2% target or near it - however, in the past, the Fed has been a fickle bunch usually looking for the 'sure' bet.

The danger the Fed faces currently is that too much jawboning and no action will crush the Fed's credibility and their tool of rhetoric used to prep the market will have dealers/investors take less notice.

For the dove, they have been able to find some cover with the Atlanta Fed lowering its GDPNow forecast yesterday to +1.8% amid slower consumer spending growth, but is it enough?

1. Mixed reaction from global stocks

Concerns over valuations, building expectations of March Fed hike, and political controversy in the White House are being attributed for the decline in global stocks.

In Japan, equities fell as investors took profits before the weekend, after hitting a 14-month high Thursday. The Nikkei dropped -0.5% on the back of a stronger yen (¥114.10). The index rose +1% on the week. The broader Topix dropped -0.4%.

In Hong Kong, the Hang Seng closed at a one month low, down -0.7%. For the week the index is down -1.7%. In China, stocks also fell and snapped a three-week winning streak. The blue-chip CSI300 index fell -0.2% on the day and -1.3% on the week. Aside from some underwhelming China services data (see below) investors are also worried about potential China regulatory reforms.

In Europe, equity indices are trading lower as market participants look to realize some weekly profits. Banking stocks are trading mixed in the Eurostoxx while commodity and mining stocks are weighing on the FTSE 100.

U.S equities are set to open in the red (-0.3%).

Indices: Stoxx50 -0.3% at 3,375, FTSE -0.3% at 7,358, DAX -0.5% at 11,998, CAC-40 -0.2% at 4,953, IBEX-35 -0.3% at 9,691, FTSE MIB -0.1% at 19,423, SMI -0.2% at 8,645, S&P 500 Futures -0.3%

2. Oil edges higher after sell-off on weaker dollar, gold under pressure

Oil prices have ticked a tad higher this morning, reclaiming some of yesterday's losses, as a weaker dollar encourages buying. However, the market remains cautious after Russian production figures this week showed weak compliance with a global deal to cut output.

Brent crude futures are up +19c at +$55.27 a barrel, recovering some of Thursday's losses that amounted to more than -2%. U.S light crude (WTI) is trading at +$52.69 a barrel, up +8c on yesterday's close.

The markets remains range bound and expect dealers to take their cue from the dollars direction after Yellen's speech today.

Ahead of the U.S open, gold prices are holding above of some key support levels (-0.3% to +$1,231.31 per ounce) after falling more than -1% yesterday. The yellow metal is on track for its first drop in five-weeks and sitting atop its weakest level since December on expectations of U.S. Fed rate hike on March 15.

Silver prices hit a 3-week low of +$17.64 Thursday, after falling -3.5% - it was metals worst one-day fall since December 15 and is on track to end the week down -3%.

Note: This is silver's first weekly drop in ten-weeks.

3. Fed anxiety keeps yields high

The reflation trade remains on track as bond markets continue to put downward pressure on bond prices and short-term paper.

This week 'hawkish' Fed sentiment has been rattling the bond market hard, sending yields climbing especially those highly sensitive to the Fed's policy outlook.

The panic has sent the yield on the two-year note (+1.316%) to the highest in more than seven-years. While U.S Bills or short-term paper, has been the hardest hit with the yield on the benchmark 3-month bill jumping +5bps to +0.7%.

Yields on 10-year Treasuries are little changed at +2.48%.

4. The pound woes continue

Sterling fell to a fresh six-week low outright (£1.2214) and reached its weakest level in three-weeks against the EUR (€0.8623) after a purchasing managers' survey on the key U.K. services sector for February came in at 53.3, below forecasts for 54.9.

Brexit discussion worries are also hampering the pounds efforts. The U.K's House of Commons is set to debate the Brexit bill amendment on March 13 and 14, keeping PM May's self-imposed deadline to trigger Article 50 on track.

Elsewhere, the EUR is consolidating its recent losses and is holding above the psychological €1.05 level at €1.0536. USD/JPY is trading atop of ¥114.30 in the European session. China's yuan has breached the ¥6.9 handle on the back of the overall USD strength and is poised for its worst week since mid-Dec against the greenback.

5. Eurozone composite PMI unrevised, China disappoints

Data this morning shows that the eurozone's composite PMI for last month was unrevised at 56.0, up from 54.4 in January and at a six-year high that suggests economic growth has picked up in the early months of 2017.

Digging deeper, the details suggest the pickup may be sustained, with new orders and backlogs of work also on the rise, prompting businesses to hire more aggressively than at any time in the past nine-years. And there are also signs that inflationary pressures are building, with costs and prices charged both rising.

In China, February's Caixin Services PMI slowed to a four-month low (52.6 vs. 53.1 m/m), even as the overall composite improved - the employment component rallied for the first time in nearly two-years.

Note: China's annual National People's Congress (NPC) begins on Sunday with anticipated announcement of 2017 economic targets.