The markets reacted positively overnight to some important Chinese data showing that the
economy there might just be on the rebound. The latest manufacturing PMI data came out
at 50.5 which was higher than the reading of 49.2 recorded in February and well above the
markets consensus of around 49.6. In addition, the privately assessed the Caixin PMI
number for March also beat the street too, coming in at 50.8. Its important to note that
anything above 50 in this kind of data signifies expansion.
So, its all good news out of China immediately today and that set the tone for a risk on rally
in Asia overnight and ensured that the European markets will also open higher this morning
as the second quarter gets underway. Having said that, given where we are in the calendar
today, I am not sure if the markets have entirely bought into these latest numbers from the
Chinese and whilst certainly positive, will probably still require further confirmation.
However, JPY has nevertheless weakened slightly on the news, but we are talking baby pips
here so far and the dollar overall has barely budged, especially against the EUR, but that’s in
stasis most of the time these days anyway! In any case the European data, going forward is
surely of much more importance for the single currency. The combination of a slightly
weaker JPY and upside traction for global stock markets is weighing on gold again this
morning as that pushes slightly lower in early trading.
The pound managed to remain above the 1.30 handle overnight and has lifted this morning,
back closer towards 1.31 as optimism remains largely intact that somehow parliament will
manage to reach some sort of positive outcome this week. As far as I am concerned I remain
highly sceptical given their track record of recent weeks. I said on Friday that it was; ‘Strike
three and you’re out’ for May, but could it be that she might still be afforded yet another
chance with her transitional deal?
I sincerely hope not quite honestly because she’s already made a mockery of the whole
process anyway. I think it’s a racing certainty that she’s on her way to the back benches
sooner than later now and as I have said before; the chances of a general election are surely
increasing by the day?
For me that is potentially just as toxic for the pound as a no deal Brexit if it does lead to a
Labour government. Add the two together and you have what I can only describe as the
perfect storm for the currency. Still as they say; a week in politics is a long time. Indeed, an
interminably long time for all us who have to sit through it!
Turning back to the Chinese data earlier today, which has kicked off a week that sees a
whole raft of important releases and events, as is usual for the first week of any new month.
The highlight is of course the latest US unemployment report on Friday, but there’s quite a
few moving parts prior to that which could have an impact.
The RBA policy decision, where no change is expected early tomorrow morning might be
interesting, especially if the Australian central bank chooses to look though this latest
Chinese data. Beyond that, the USD is still largely in the driving seat, but so far yet to make
any headway past that important level I showed you all again on Friday.
Meanwhile, the pound will continue to grab the lion’s share of any currency volatility that is
out there in the system as indeed has been the case for many a week now and from a
‘headline trading’ perspective still very much the one to focus on. However, its again
important not to be fooled into thinking there’s yet any certainty over long term direction
for the currency, especially not today at any rate!
Important Economic Releases Due this week
01/04- 9.30am UK March Manufacturing PMI
01/04- 10am Eurozone February Unemployment report
01/04- 10am Eurozone March CPI Estimate
01/04- 1.30pm US February Advanced Retail Sales report
01/04- 3.00pm US March ISM Manufacturing Index
02/04- 4.30am Australian RBA Monetary Policy Decision
(benchmark rate expected to be unchanged at 1.50%)
02/04- 1.30pm US February Durable Goods Orders
03/04- 9.30am UK March Services PMI
03/04- 1.15pm US ADP March Private Payroll Report
04/04- 12.30pm ECB publishes March Policy Meeting Minutes
05/04- 1.30pm Canadian March Unemployment Report
05/04- 1.30pm US March Unemployment Report