China Manufacturing Stalls as Focus now Shifts to the G20 Summit

Earlier in the Day:

Economic data released through the Asian session was on the heavier side again this morning, with key stats including October building consent figures out of New Zealand, October labour market, inflation and industrial production figures out of Japan, private sector credit figures out of Australia and November private sector PMI numbers out of China.

For the Kiwi Dollar, building consents rose by 1.5% in October, month-on-month, reversing September’s 1.3% fall, according to figures released by NZ Stats.

• The increase was attributed to a jump in consents in Auckland (25%) and Wellington (23%), which were partially offset by falls in the rest of the North Island (-7.4%) and Canterbury (-10%)
• Year-on-year, building consents rose by 6.7%.

The Kiwi Dollar moved from $0.68584 to $0.68585, showing little response to the figures before rising to $0.6859 at the time of writing, a loss of 0.01% for the session, the positive numbers coming off the back of a rebound in business confidence in the construction sector, according to the November ANZ Business Confidence Index figures released on Thursday.

For the Japanese Yen, the job / applications ratio eased from 1.64 to 1.62, coming up short of a forecasted 1.65, with the unemployment rate coming in at 2.4%, which was up from September’s and a forecasted 2.3%.

On the inflation front, Tokyo’s annual rate of core inflation held steady at 1%, which was in line with forecasts.

• Providing support to the annual rate of core inflation was a 5.4% rise in prices for fuel, light and water charges, with prices also on the rise for culture and recreation (1.6%), medical care (1.3%), clothes and footwear (0.9%), education (0.8%) and housing (0.3%).
• Prices for furniture and household utensils slipped by 0.2%.

The Japanese Yen moved from ¥113.4 to ¥113.415, against the U.S Dollar, upon release of the figures, which came ahead of the industrial production numbers.

Industrial production rose by 2.9% in October, according to prelim figures, coming in well above a forecasted 1.2% rise, whilst reversing September’s 0.4% decline.

• Industries that mainly contributed to the increase were: General-purpose and business orientated machinery, electronic parts and devices and motor vehicles.
• Industries that mainly contributed to a decrease were: Production machinery and petroleum and coal products.

The Japanese Yen moved from ¥113.413 to ¥113.369, against the U.S Dollar, upon release of the figures, before rising to ¥113.40 at the time of writing, a gain of 0.07% for the session, the better than expected production numbers providing further support to a 4^th quarter recovery in the Japanese economy.

For the Aussie Dollar, month-on-month, private sector credit rose by 0.4%, in October, which was in line with forecasts and September’s 0.4% rise, according to figures released by the RBA.

• Housing credit rose by 0.3%, which was at the same pace as in September, while personal credit fell by 0.2%, following a 0.1% fall in September.
• Supporting the upside was a 0.6% rise in business credit that was in line with September’s rise.
• Year-on-year, business credit rose by 4.7%, up from September’s 3.9%, while housing credit saw slower growth, rising by 5.1% following September’s 6.5% rise.
• As was the case with the monthly figures, personal credit saw red, falling by 1.6%, with the pace of decline accelerating from September’s 1%.

The Aussie Dollar moved from $0.73211 to $0.7324 upon release of the figures that came out ahead of China’s private sector PMI numbers.

Out of China, private sector PMI numbers disappointed once more, with the November manufacturing PMI reporting a stall in activity, the PMI coming in at 50, falling short of a forecasted and October 50.2. Things were slightly better for the services sector, with the PMI coming in at 53.4, falling short of a forecasted 53.8 and October’s 53.9, while holding well above 50.0.

The ongoing trade war between the U.S and China continues to impact in spite of China’s trade figures holding up in recent months, the real effects of the ongoing trade war yet to be truly reflected in the numbers.

New export orders were reported to have contracted for a 6^th consecutive month in the manufacturing sector, whilst seeing a slight improvement in November.

The Aussie Dollar moved from $0.73190 to $0.73188 upon release of the figures, before easing to $0.7317 at the time of writing, a loss of 0.03% for the session, the G20 Summit now key for the Aussie Dollar near-term, with Trump and Chinese Premier Xi scheduled to meet on Saturday.

The Day Ahead:

For the EUR, it’s another relatively busy day ahead for the EUR, with key stats scheduled for release including retail sales figures out of Germany, unemployment numbers out of the Eurozone and prelim November inflation figures out of France, Italy and the Eurozone.

While we will expect the inflation numbers to be the main area of focus, recent weakness in key economic indicators out of Germany will give the retail sales figures some influence, with better than expected employment data released on Thursday supporting a forecasted pickup in domestic consumption in October.

Outside the stats, a dovish FED and the start of the G20 Summit will give the EUR some direction.

At the time of writing, the EUR was down 0.05% to $1.1387, with today’s stats and geo-politics the key drivers through the day.

For the Pound, another quiet day on the economic data front leaves the Pound exposed to Brexit chatter, with the G20 Summit a timely get together for Theresa May and world leaders in a bid to lay the foundations for bilateral trade talks as Britain prepares to stumble out of the EU.

The Pound continues to be under pressure in spite of Theresa May negotiating a deal with the EU, with reports of parliament looking to scrap May’s deal and replacing it with a new deal and of Scotland’s traditionally divided parties uniting to reject the deal next week weighing.

There’s certainly plenty of uncertainty and, should Theresa May’s deal fail on 11^th December, it could also spell the end of the Tory party, which would support further downside in the Pound.

At the time of writing, the Pound was down 0.12% at $1.2776, with Brexit news the key driver through the day.

Across the Pond, economic data scheduled for release is on the lighter side, with stats limited to Chicago’s November PMI that is forecasted to be Dollar positive.

Outside of the stats, FOMC member Williams could spell more Dollar weakness should he tow the FED’s latest line on where normalization sits, though it may ultimately boil down to updates from Buenos Aires, with the G20 Summit kicking off today and Trump expected to ruffle a few feathers.

At the time of writing, the Dollar Spot Index was up 0.02% to 96.801, with today’s stats and chatter from the G20 being the key drivers.

For the Loonie, its busier day on the data front, with key stats scheduled for release including 3^rd quarter GDP numbers and October’s RMPI. With forecasts skewed to the negative for the Loonie, things could get worse should updates from the G20 Summit reflect unlikely progress on trade, which would weigh on risk sentiment and the demand outlook for crude oil prices.

The Loonie was down 0.02% to C$1.3285 against the U.S Dollar at the time of writing.