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EUR/USD hits fresh three-week lows, amid solid U.S. employment data

EUR/USD touched fresh three-week lows on Wednesday before closing slightly lower, as solid U.S. employment forecasts provided optimism for further signals of continued improvement in the labor market ahead of a critical government jobs report at week's end.

The currency pair traded between 1.0825 and 1.0881, before settling at 1.0869, down 0.0018 or 0.06% on the session. The euro has closed lower against the dollar in six of the last nine and 11 of the last 14 sessions. Since surging to three-month highs on February 11, the euro has plummeted by nearly 4% against its American counterpart.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.

On Wednesday morning, the ADP Research Institute said non farm private employment rose by 214,000, last month, topping expectations for gains of 190,000. It came after ADP downwardly revised employment data in January by 12,000 to 193,000. While ADP's forecasts do not always mimic the results from the Labor Department's monthly report, their predictions have been fairly accurate over the last two months.

When the Labor Department releases its February jobs report on Friday, the Bureau of Labor Statistics is expected to report that nonfarm payrolls rose by 190,000 last month, following an increase of 151,000 a month earlier. The unemployment rate is expected to remain steady at 4.9%, one month after falling to its lowest level in eight years. The Labor Force Participation Rate also ticked up 0.1 to 62.7%, as the struggling manufacturing industry added 29,000 positions, its best one-month performance since November, 2014.

Analysts will also a keep close eye on monthly wage gains after hourly workers saw their earnings surge by 0.5% in January, amid a wave of minimum wage hikes at numerous states throughout the country. Last month, hourly wages were expected to rise by 0.2%, according to consensus forecasts. Federal Reserve chair Janet Yellen has continually reiterated that the Fed will employ a data driven approach, as it weighs the timing of its next interest rate hike. While the Fed has judged that the labor market is close to returning to full employment, sluggish inflation remains below its targeted objective of 2%.

A robust jobs report on Friday could compel the Federal Open Market Committee to accelerate its pace of tightening when it meets next on March 15-16. Any rate hikes by the U.S. central bank this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.

Elsewhere, currency traders continued to evaluate downbeat euro zone inflation and manufacturing data from earlier this week, as they await next week's key interest rate decision from the European Central Bank. At the closely-watched meeting, the ECB's Governing Council could lower its deposit and marginal lending facility rates and extend the scope of its €60 a month quantitative easing program in an effort to jumpstart to economic growth. The ECB is widely expected to reverse its monetary policy course from January when it held its benchmark interest rate at a record-low of 0.05%.

"The review has to be seen against the background of increased downside risks to the earlier outlook amid heightened uncertainty about emerging market economies' growth prospects, volatility in the financial and commodity markets, and geopolitical risks," ECB president Mario Draghi said in a letter to a member of the European Parliament on Tuesday.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose to a four-week high at 98.59, before falling back to close at 98.20, down 0.14% for the session.

Dollar remains near 1-month highs vs. rivals

The dollar continued to trade near one-month highs against the other major currencies on Wednesday, as the release of upbeat U.S. private sector employment data added to optimism over the strength of the economy.

USD/JPY eased 0.08% to 113.92.

The greenback remained supported after payroll processing firm ADP said non-farm private employment rose by 214,000 last month, surpassing expectations for an increase of 190,000.

The economy created 193,000 jobs in January, whose figure was downwardly revised from a previously reported increase of 205,000.

The data came after a string of upbeat U.S. economic reports, adding to expectations for the Federal Reserve to hike interest rates again this year.

EUR/USD slid 0.37% to 1.0827.

The euro remained under pressure after weak euro zone inflation and factory data earlier in the week cemented expectations for more easing by the European Central Bank at its upcoming meeting on March 10.

The dollar was lower against the pound, with GBP/USD up 0.78% at 1.4062 and was higher against the Swiss franc, with USD/CHF rising 0.30% to 1.0005.

Earlier Wednesday, data showed that the Markit construction purchasing managers' indexfell to 54.2 from January’s 55.0. Economists had expected the index to tick up to 55.5.

It was the slowest increase in overall construction output since April 2015.

Meanwhile, the Australian and New Zealand dollars were stronger, with AUD/USD up 1.18% at 0.7260 and with NZD/USD edging up 0.11% to 0.6635.

The Aussie was boosted after the Australian Bureau of Statistics said that gross domestic product grew 0.6% in the fourth quarter, beating expectations for 0.4%. The economy grew 1.1% in the third quarter, whose figure was revised from a previously estimated growth rate of 0.9%.

Year-on-year, Australia’s economy grew 3.0% in the last quarter, above expectations for 2.5%.

USD/CAD gained 0.32% to 1.3451.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.17% at 98.52, just below the previous session’s one-month high of 98.59.

Forex - Aussie up after better-than-expected Q4 GDP data

The Aussie gained solidly on Wednesday after better-than-expected GDP data set the tone.

AUD/USD traded at 0.7212, up 0.53%, while USD/JPY changed hands at 113.88, down 0.12%.

Australian GDP data for the fourth quarter showed a gain of 0.6%, better than the 0.4% gain seen quarter-on-quarter and came in at a 3.0% pace year-on-year, beating the 2.9% gain expected.

Earlier in Australia, HIA new home sales for January rose 3.1% month-on-month, compared to a 6.0% gain in the previous month.

On Tuesday, the Reserve Bank of Australia held its cash rate at a record low 2%, as expected, and said there was scope for further easing if needed.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.06% to 98.34.

Overnight, the dollar rose to fresh one-month highs against the other major currencies on Tuesday, after the release of upbeat U.S. manufacturing activity data added to optimism over the strength of the economy.

The Institute for Supply Management said its index of purchasing managers inched up to 49.5 last month from a reading of 48.2 in January. Analysts had expected the manufacturing PMI to rise to 48.5 in February.

The safe-haven yen strengthened earlier after data showed that activity in China’s manufacturing sector contracted for the seventh straight month in February.

The official manufacturing PMI fell to 49.0 from January's reading of 49.4, falling further below the 50 level that separates growth from contraction. Economists had expected the index to tick down to 49.3. The private sector Caixin manufacturing PMI was also weaker, falling to 48.0, from 48.4 in January, undershooting market expectations of 48.3.

Japan stocks higher at close of trade; Nikkei 225 up 4.11%

Japan stocks were higher after the close on Wednesday, as gains in theInsurance, Shipbuilding and Electrical/Machinery sectors led shares higher.

At the close in Tokyo, the Nikkei 225 added 4.11%.

The best performers of the session on the Nikkei 225 were IHI Corp. (T:7013), which rose 12.81% or 26.0 points to trade at 229.0 at the close. Meanwhile, Alps Electric Co., Ltd.(T:6770) added 12.75% or 231.0 points to end at 2043.0 and SUMCO Corp. (T:3436) was up 10.74% or 77.0 points to 794.0 in late trade.

The worst performers of the session were Tokuyama Corp. (T:4043), which fell 1.26% or 2.0 points to trade at 157.0 at the close. Toho Zinc Co., Ltd. (T:5707) declined 0.66% or 2.0 points to end at 301.0 and Maruha Nichiro Corp (T:1333) was down 0.39% or 9.0 points to 2293.0.

Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 1781 to 75 and 35 ended unchanged.

The Nikkei Volatility, which measures the implied volatility of Nikkei 225 options, was down 7.28% to 31.32.

Crude oil for April delivery was down 0.52% or 0.18 to $34.22 a barrel. Elsewhere in commodities trading, Brent oil for delivery in May rose 0.24% or 0.09 to hit $36.90 a barrel, while the April Gold contract fell 0.27% or 3.30 to trade at $1227.50 a troy ounce.

USD/JPY was up 0.23% to 114.28, while EUR/JPY rose 0.10% to 124.03.

The US Dollar Index was up 0.13% at 98.47.

Insurers find Google a potential rival: report

LONDON (Reuters) - More than 40 percent of insurers see Google (O:GOOGL) as a potential threat because of its strong brand and ability to use customer data, a report released on Tuesday said.

And young, mobile phone-friendly consumers may bypass traditional insurers for "new, more nimble" competitors, consultancy Capgemini's annual world insurance report said.

Google beat other household names Amazon (O:AMZN) and Wal Mart as the biggest new entrant threat, based on interviews with more than 150 insurance executives.

Insurers are looking to use technology to gain more information about their customers and potentially offer them lower-cost insurance.

This has already happened in car insurance with telematics - the use of a black box in cars to see how safely customers are driving.

One of the next areas for insurers is the connected home - with technology that enables you to turn off your oven from a distance if it has been left on, for example, potentially avoiding a fire.

Google owns connected home products maker Nest, which could act as a springboard to providing insurance.

"To withstand the coming competition, insurers must build up their brands, learn to take advantage of real-time customer data, and develop agile operating models," Capgemini said.

However, some insurance industry specialists doubt that technology companies will enter the heavily-regulated insurance sector directly, seeing them as more likely to form partnerships with insurers, potentially giving those firms an advantage.

In the United States, Liberty Mutual has already joined up with Nest to offer insurance discounts for Nest users.

"Google will not become an insurance underwriter," said Nigel Walsh, head of UK insurance at Capgemini.

But with products such as Nest, "they are a massive part of the insurance value chain, because of what they know about consumers," he added.

The insurance industry also needs to improve its service if it is going to win business among younger customers.

Only 34 percent of customers below the age of 35 reported positive experiences with their insurers, compared with 55 percent of over 35s, a Capgemini survey of more than 15,000 customers in 30 countries found.

Asian factories hit hard in February, jobs on the line

By Ian Chua

SYDNEY (Reuters) - Manufacturing activity across much of Asia shrank in February with China suffering a seventh straight month of decline, a blow to policymakers who only a day earlier resumed an easing cycle in a fresh effort to spur growth.

Business surveys from China to Indonesia showed no signs of reversing a weakening trend, forcing factories in the trade-reliant region to shed yet more jobs and cut prices, a move that could worsen a global disinflationary trend.

Surveys of manufacturing output from other parts of the globe will be released later on Tuesday.

Asia's grim readings will sharpen the focus of officials in the world's leading economies who declared at a weekend G20 meeting that they needed to look beyond ultra-low rates and printing money to reanimate growth.

Economists at Citi said last week that the chances of a global recession - which it defines as global growth falling below 2 percent - are rising.

China aims to lay off 5-6 million workers from "zombie enterprises" over the next two to three years, two sources with ties to the country's leadership told Reuters.

Australia's central bank governor, Glenn Stevens, observed on Tuesday that conditions have become more difficult for a number of emerging market economies and noted that "China's growth rate has continued to moderate."

Stevens, who attended the Shanghai G20 meeting, made those comments after leaving interest rates at a record low 2.0 percent. He kept a conditional easing bias in a widely expected outcome.

Survey after survey served to remind how challenging the current environment is.

INDIA AS A STANDOUT

Japan's factories saw their weakest growth in eight months, while Indonesia and Malaysia contracted for the 17th and 11th month respectively, according to survey compiler Markit. Taiwan went into reverse gear for the first time in three months as orders wilted.

India was perhaps the only standout, and for merely maintaining modest growth driven by cutting prices to attract demand.

The Nikkei/Markit Manufacturing Purchasing Managers' Index held steady at 51.1, the second month above the 50 mark that separates growth from contraction.

By contrast, China's official Purchasing Managers' Index (PMI) stood at 49.0 in February, down from 49.4 and below the 50 mark for a seventh month.

A private survey, the Caixin/Markit China PMI, which focuses on small and mid-sized companies, fared no better, falling to 48.0, from 48.4, and undershooting market expectations of 48.3.

Analysts said some of the weakness in China's PMIs was probably due to the long Lunar New Year holidays, but they pointed to a worrying fall in the index's employment gauge which dropped to its lowest since January 2009.

"The big question is do we see a pick up in the second quarter once China does pass through the seasonal disruption, but at the moment there is little hope for that to happen in any significant way," said Angus Nicholson, market strategist at brokerage IG in Melbourne.

Underscoring how a slowdown in China is putting trade-reliant economies on the skids, South Korean exports in February tumbled in their 14th consecutive month of declines.

PRESSURE ON POLICYMAKERS

Job destruction from a slowing Chinese economy and reform of bloated state enterprises will put pressure on policymakers to come up with measures to create employment as Beijing finalizes its plan for China's development over the next five years.

Late Monday, the People's Bank of China (PBOC) announced it was cutting the amount of cash that banks must hold as reserves for the fifth time since February 2015.

The 50-basis-point cut to the reserve requirement ratio (RRR) is designed to release an estimated $100 billion of long-term cash into the bank system, in hopes it will flow through to the wider economy.

Analysts expect the PBOC will have to do more including cutting interest rates this year.

"Following the latest move, we add another 50 basis point RRR cut, and continue to look for two rate cuts in the first half of 2016," analysts at Barclays (L:BARC) Capital wrote to clients.

"Risks to our 6.0 percent baseline GDP growth forecast in 2016 remain tilted to the downside."

European stocks move higher with oil, despite Chinese data

European stocks make a comeback in early trading on Tuesday as investors shrugged off another weak bound of activity in China’s manufacturing sector.

Despite starting the session in negative territory, European stocks moved higher with theDax rising 1.25% at 9:00AM GMT or 4:00AM ET, while the CAC 40advanced 0.38%, theFTSE gaining 0.49% and the European benchmark Euro Stoxx 50 rising 0.87%.

Asian stocks were mostly higher as investors digested the news that China’s central bankhad cut the reserve requirement ratio (RRR) in order to enhance liquidity in the financial system and despite the news that the activity in the manufacturing sector of the world’s second largest economy had contracted for the seventh consecutive month.

The euro zone’s own manufacturing PMI data for February came in slightly higher than expected tallying 50.5, compared to the prior read of 50.2 which was expected to remain steady.

Meanwhile, the German labor market showed some strength with unemployment claimsdropping by 10,000, although the jobless rate in the motor of the euro zone economy remained unchanged at 6.2%.

Crude prices helped bolster investor sentiment in stocks as thanks to reports of decreasing production and strong oil demand. Crude oil futures for April delivery on the New York Mercantile Exchange rose $0.30, or 0.89%, to trade at $34.05 a barrel, while Brent oiladvanced $0.16 or 0.44% to $36.73.

On the business front, shares in Barclays (L:BARC) were slammed, down more than 9%, after the British bank reported an 8% decrease in pre-tax profit for 2015.

Fresnillo (L:FRES) also gave up roughly 1% after reporting its own drop in 2005 net profit to $70.5 million, from the prior year’s $108.5 million.

Glencore (L:GLEN) was also hit by its own earnings report, trading down close to 2%. The miner tallied a 32% decline in full-year core earnings as the drop in commodity prices took its toll.

In positive news, London Stock Exchange Group (L:LSE) surged more than 7% on news that the Intercontinental Exchange is considering to make an offer for the exchange operator.

Forex - Aussie holds steady, kiwi declines after disapppointing data

The Australian dollar held steady against its U.S. counterpart on Monday, while the New Zealand dollar moved lower after the release of disappointing data from both New Zealand and Australia.

AUD/USD was steady at 0.7127.

Earlier Monday, the Australian Bureau of Statistics said tha company operating profitsdeclined by 2.8% in the fourth quarter, compared to expectations for a 1.8% fall.

Company operating profits increased by 1.4% in the third quarter, whose figure was revised from a previously estimated 1.3% gain.

NZD/USD dropped 0.65% to trade at 0.6589.

Data also showed that the ANZ business confidence index for New Zealand slid down to 7.1 in January from a reading of 23.0 the previous month.

Meanwhile, the greenback remained supported after data on Friday showed that while the U.S. economy slowed in the fourth quarter, the pace of the slowdown was not as steep as initially estimated.

The Commerce Department said gross domestic product grew at an annual rate of 1.0% in the three months to December, up from an initial estimate of 0.7% growth. Economists had expected fourth quarter GDP growth to be revised down to 0.4%.

Separate reports showing consumer spending and inflation rose in January added to the view that the U.S. recovery is on track.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.21% at 97.92, pulling away from Friday’s three-week high.

Gold slips lower as markets pause

Gold slipped lower in European morning hours on Friday, as markets paused after the precious metal’s recent rally and awaited the release of key U.S. economic reports due later in the day.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery were down 0.11% at $1,237.40.

The April contract ended Thursday's session little changed at $1,238.80 an ounce.

Futures were likely to find support at $1,207.40, the low from February 23 and resistance at $1,250.10, the high from February 24.

Demand for the safe-haven precious metal paused as oil prices rose back above $33 a barrel overnight, following reports Saudi Arabia, Qatar, Venezuela and Russia will meet in March to discuss capping crude oil production.

The rise in prices did not last however, as concerns over a global supply glut persisted.

Meanwhile, investors were eyeing the release of U.S. economic growth, personal spending and consumer sentiment data, due later Friday, for further indications on the strength of the economy and potential U.S. rate hikes this year.

Gold prices have been well-supported in recent weeks amid growing speculation the Federal Reserve could delay the pace of its tightening for the remainder of 2016.

Prices of the yellow metal soared to a one-year high of $1,263.90 on February 11. Gold is up nearly 16% so far this year amid indications global economic and financial headwinds could make it tough for the Fed to raise interest rates as much as it would like this year.

Elsewhere in metals trading, silver futures for March delivery slid 0.30% to $15.125 a troy ounce, while copper futures for March delivery gained 0.77% to $2.092 a pound.