US Yields Higher Post FOMC Minutes, Stocks Drop, USD Strengthens

German Markit Manufacturing PMI (Feb) was 60.3 v an expected 60.6, from 61.1 previously. Markit Services PMI (Feb) was 55.3 v an expected 57.0, from 57.3 previously. Markit PMI Composite (Feb) was 57.4 v an expected 58.5, from 59.0 prior. EURUSD moved lower from 1.23318 to 1.23168 following this data release. Eurozone Markit Manufacturing PMI (Feb) was 58.5 v an expected 59.3, from 59.6 previously. Markit Services PMI (Feb) was 56.7 v an expected 57.6, from 58.0 previously. Markit PMI Composite (Feb) was 57.5 v an expected 58.5, from 58.8 prior. EURUSD moved higher from 1.23168 to 1.23393 in reaction to this data. UK Average Earnings excluding Bonus (3Mo/Yr) (Dec) was 2.5% v an expected 2.4%, from 2.4% previously, which was revised down to 2.3%. Claimant Count Change (Jan) was -7.2K v an expected 4.1K, from a previous reading of 8.6K, which was revised down to 6.2K. ILO Unemployment Rate (3M) (Dec) was 4.4% v an expected 4.3%, from 4.3% previously. Average Earnings including Bonus (3Mo/Yr) (Dec) was, as expected, at 2.5%, from 2.5% previously. Claimant Count Rate (Jan) was 2.3% against a reading of 2.4% previously. Public Sector Net Borrowing (Jan) was £-11.620B against an expected £-11.100B, from £0.979B prior, which was revised down to £0.280B. GBPUSD sold off from 1.39736 to a low of 1.39280 before recovering briefly and then setting a daily low of 1.39043 after this data release. In his speech, FOMC Member Harker said that US inflation would reach or exceed the 2% goal by the end of 2019. The Unemployment rate is to fall to 3.6% by the beginning of H2 2019 and then retrace higher. US GDP is expected to grow as much as 2.5% this year and 2% in 2019. He also said that a trade war would not be good for the US economy. Changes to the FED’s long-term policy strategy would probably not need legislative change and he was in no rush to make changes to the Fed’s strategy framework. He said that he would have to think long and hard about raising the inflation target. USD moved to a low of 1.07333 from 107.477. BOE Governor Carney and MPC Members Broadbent, Haldane and Tenreyo took part in the Parliament’s Treasury Committee Hearings and Inflation Report Hearings. Comments made were as follows: BOE Governor Carney said he does not ever commit to a specific path of interest rates except in exceptional circumstances. He said he generally uses a “conditioning path” and the path at the November report was two rate hikes but is now almost three. He also said that the UK is not in exceptional circumstances currently. The horizon to bring inflation back to the target has moved to less than three years but is not two years in the collective opinion of the MPC. Further stimulus withdrawal will be needed in the coming years. The FX pass-through has a prolonged effect on the UK. The biggest uncertainty is Brexit. The monetary policy is nimble and can react to …