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Manufacturing Sector PMIs Put the EUR, GBP and Dollar in Focus

With a phase 1 trade agreement due to come into effect, will the markets forgive weak manufacturing PMIs?
Bob Mason
Global financial markets

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar in the earlier hours of this morning.

China’s Caixin manufacturing sector PMI figures were in focus in the early part of the day.

Outside of the numbers, market risk sentiment towards the U.S – China phase 1 trade agreement also provided direction.

Out of China

The Manufacturing PMI fell from 51.8 to 51.5 in December. Economists had forecast a manufacturing PMI of 51.8.

According to the Markit Survey,

  • While output continued to rise at the end of the year, new order growth fell to a 3-month low. Export sales saw marginal growth.
  • Confidence in the 12-month business outlook also remained relatively weak.
  • While hiring stagnated in December, firms expanded purchasing activity and increased inventories.
  • In December, selling prices increased for the first time in 6-months.

The Aussie Dollar moved from $0.70163 to $0.70157 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.7017.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.07% to ¥108.68 against the greenback, with the Kiwi Dollar up by 0.10% to $0.6731.

Volumes remained on the lighter side through the morning, with Japan and New Zealand’s markets closed.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include Italy and Spain’s December manufacturing PMI numbers. Finalized manufacturing PMIs from France, Germany, and the Eurozone will also need to be watched.

Barring any revision to prelim figures, however, the focus will likely remain on Italy and the Eurozone’s PMIs.

Outside of the numbers, expect any Brexit chatter to also influence. EU member states have just 1-month to deliver their list of demands to the British PM…

At the time of writing, the EUR was up by 0.07% to $1.1220.

For the Pound

It’s a relatively quiet day ahead on the economic calendar, with finalized manufacturing PMI numbers for December in focus. Barring a downward revision, there’s unlikely to be too much influence on the Pound.

While the UK markets reopen, the UK Parliament remains in recess until 5th January. Any chatter on Brexit will influence, however. Britain now has just one month remaining before entering the transition period, which may well end in December.

At the time of writing, the Pound was down by 0.01% to $1.3253.

Across the Pond

It’s also a relatively busy day on the data front. Key stats include December finalized manufacturing PMI numbers.

Barring a deviation from prelim, however, the numbers are unlikely to have a material impact on the Dollar. The focus will be on the ISM numbers due out on Friday.

Outside of the numbers, any chatter on the phase 1 trade agreement and military strikes in the Middle East will also influence.

Over the holidays, Trump set the date for the signing of the phase 1 agreement. The agreement is scheduled to be signed on 15th January in Washington.

The attack on the U.S embassy in Iraq could see tensions between the U.S and Iran rise further, which would also be a test for the global financial markets.

At the time of writing, the Dollar Spot Index was up by 0.02% to 96.461.

For the Loonie

It’s a quiet day on the economic calendar, with no material stats due out of Canada to provide direction.

The lack of stats will leave the Loonie in the hands of sentiment towards trade. While the U.S and China move closer to signing phase 1, the real question is when phase 2 talks will begin. Tariffs remain and could test risk appetite and recent gains in crude oil prices. For now, getting the phase 1 agreement across the line remains key.

Rising tensions in the Middle East, as the U.S deploys more troops, would support the Loonie, however.

The Loonie was up by 0.11% to C$1.2973 against the U.S Dollar, at the time of writing.

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