Forex Today: Market focus shifts to February PMI data

Here is what you need to know on Friday, February 21:

The action in financial markets quiets down on Friday as investors await preliminary February Manufacturing and Services Purchasing Managers' Index (PMI) data from Germany, the Eurozone, the UK and the US. In the second half of the day, the US economic calendar will also feature Existing Home Sales data for January and several Federal Reserve (Fed) policymakers will be delivering speeches heading into the weekend.

Following a two-day recovery, the US Dollar (USD) Index came under renewed bearish pressure during the American trading hours on Thursday and dropped to its lowest level in over two months near 106.30. The data from the US showed that the weekly Initial Jobless Claims rose to 219,000 from 214,000. Meanwhile, the benchmark 10-year US Treasury bond yield dropped below 4.5%, putting additional weight on the USD's shoulders. Early Friday, the index stays in a consolidation phase at around 106.50. 

In the early trading hours of the Asian session, the data from Japan showed that the National Consumer Price Index (CPI) in Japan increased by 4% on a yearly basis in January, up from 3.6% in December. Commenting on the policy outlook, "more interest rate hikes could come into sight if the price outlook continues to improve, and there might be some unpredictable impact on the economy," Bank of Japan (BoJ) Governor Kazuo Ueda said on Friday. After losing more than 1% on Thursday, USD/JPY stages a rebound on Friday and was last seen rising about 0.6% on the day at 150.50.

Jibun Bank Composite PMI in Australia edged higher to 51.2 in January from 51.1, suggesting that the private sector's economic activity continued to expand at a modest pace. In the meantime, Reserve Bank of Australia Governor Michele Bullock said that they will remain cautious about the prospects for further policy easing. After reaching its highest level since early December above 0.6400, AUD/USD corrects lower toward 0.6380 in the early European session.

The UK's Office for National Statistics (ONS) reported on Friday that Retail Sales in the UK rose by 1.7% on a monthly basis in January. This reading followed the 0.6% decrease recorded in December and beat the market expectation of 0.3% by a wide margin. GBP/USD holds its ground in the European morning and trades at a fresh two-month high above 1.2670.

EUR/USD benefited from the broad-based USD weakness and rose more than 0.7% on Thursday. The pair fluctuates in a narrow band at around 1.0500 early Friday.

Gold reached yet another record-high above $2,950 on Thursday but struggled to preserve its bullish momentum. In the European morning, XAU/USD trades in negative territory near $2,930.