Private Sector PMIs Put the EUR and the Dollar in Focus

Earlier in the Day:

It was a busy Asian economic calendar this morning. The Aussie Dollar was in action in the early part of the day.

Out of Australia, manufacturing and building approval figures were in focus ahead of China’s Caixin Manufacturing PMI for January.

Outside of the numbers, negative news updates on the coronavirus from the weekend remained a test for the markets. News of the Chinese government’s plan to inject CNY1.2 trillion worth of liquidity through repos ahead of the Chinese market open provided some early support.

For the Aussie Dollar

The AIG Manufacturing Index fell from 48.30 to 45.4 in January. According to the January AIG Report,

• The index fell to its lowest level since 2015
• All manufacturing sectors reported weaker conditions and only the food & beverage sector reported expanding conditions…

Building approvals fell by 0.2% in December, month-on-month, which was better than a forecasted 3% fall. In November, consents had jumped by a revised 10.9%.

The Aussie Dollar moved from $0.66953 to $0.67004 upon release of the figures that preceded China’s manufacturing PMI.

Out of China

The Caixin Manufacturing PMI fell from 51.5 to a 5-month low 51.1 in January. Economists had forecast a fall to 51.3.

According to the January Caixin survey,

• The rate of growth in new orders eased for a 3^rd consecutive month, with new export orders falling for the 1^st time in 4-months.
• Output growth eased to a moderate pace as a result of the softer inflow of new orders.
• Downsize policies were introduced as a result of weaker orders in order to reduce costs, with employment falling in January.
• Business confidence hit a 22-month high, however, supported by the signing of the phase 1 trade agreement.

The Aussie Dollar moved from $0.67024 to $0.66989 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.09% to $0.6698.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.19% to ¥108.56 against the U.S Dollar, with the Kiwi Dollar down by 0.03% to $0.6462.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats due out of the Eurozone include Spain and Italy’s manufacturing PMI numbers for January.

Finalized PMI numbers for France, Germany, and the Eurozone are also due out later this morning.

Barring deviation from prelim figures, we expect Italy and the Eurozone’s manufacturing PMIs to have the greatest impact on the EUR.

Positive numbers would likely have a muted impact, however, with concerns over the impact on the coronavirus on the global economy likely to overshadow any upbeat figures from the start of the year.

Outside of the numbers, expect risk sentiment to also influence. We saw the EUR find support on Friday as economic data out of the U.S pinned back the Greenback. An extended period of risk aversion could see those gains reversed…

At the time of writing, the EUR was down by 0.09% to $1.1083.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. The UK’s finalized Manufacturing PMI for January is due out later today.

Barring any downward revision, the numbers are likely to be brushed aside.

On the Brexit front, Britain embarks on its new journey, which brings trade chatter into the spotlight.

At the time of writing, the Pound was down by 0.22% to $1.3177.

Across the Pond

It’s a busy day ahead on the data front.

Key stats due out of the U.S include January’s ISM Manufacturing PMI and finalized Markit PMI.

Expect the ISM Manufacturing PMI to have the greatest impact.

Last week, we saw the Chicago PMI materially weigh on the Dollar, with the numbers expected to lead to a disappointing ISM PMI.

Any better than forecast rise in the PMI should provide the Dollar with some support at the start of the week.

Outside of the numbers, the coronavirus will also provide direction, with an extended period of risk aversion likely to drive demand for the Greenback.

At the time of writing, the Dollar Spot Index was up by 0.10% to 97.487

For the Loonie

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

While there are no stats to provide direction, there’s has been plenty of chatter on how the coronavirus will impact Canada’s economy.

Not only is China a major trading partner, but also a major source of tourism.

The more optimistic view is that the virility of the virus will abate in the coming months. When considering the shift in global demographics, however, the increase in the number of the middle class in China may well see the spread continue beyond the 6-7 months that was seen back in 2002-2003.

Global economies are also significantly more interlinked with a significantly larger Chinese economy than back in 2003…

More bad news and expect the Loonie to begin eyeing C$1.34 levels against the Greenback.

The Loonie was down by 0.02% at C$1.3239 against the U.S Dollar, at the time of writing.