The dollar is trading lower this morning against its G10 peers amid a strong equity rally. S&P 500 futures are up nearly +1.5% ahead of today’s data-filled day. UST yields are higher across the curve as the 20-year Treasury auction saw weaker demand. At 8:30, jobless claims data will be released with the market expecting 216k initial claims and 1.884M continuing claims. Then at 9:45, PMI data will come out with the market anticipating a reading of 51.8 for composite PMI.

Yesterday the FOMC minutes reinforced the narrative that the Fed was in no rush to ease policy. According to the minutes, most participants noted the risks of moving too quickly to ease the stance of policy. Meanwhile on QT, the minutes confirmed plans to begin in-depth balance sheet discussions at the March meeting, though this came with a view “to guide an eventual decision to slow the pace of runoff”, so not just suggesting that a change on QT is imminent.

EUR/USD moved sharply higher during the London session and remains elevated despite a retracement as we open the NY session. Our traders think flash PMIs will be market participants’ primary focus, and that a positive surprise will lead to a continuation of the current position squeeze. They note that it already feels as though positioning has been reduced significantly.

Over in the UK, composite PMI printed at 53.3, higher than expectations at 52.9. However, manufacturing PMI continued to disappoint coming in at 47.1, lower than expectations at 47.5. Our strategist noted that staggering divergence between employment in the services and manufacturing sectors. The services sector has been showing continued improvement in employment intentions, whereas manufacturing continues to show plummeting employment levels.

In Japan there were overnight comments from BoJ’s Governor Ueda that the country’s inflation was accelerating, reiterating the BoJ’s conviction that conditions to end NIRP are falling into place.

Looking at the day ahead, data releases include the flash PMIs for February from the US, along with the US weekly initial jobless claims and existing home sales for January. From central banks, we’ll hear from the Fed’s Jefferson, Harker, Cook, Kashkari and Waller. - DB