The Dollar Takes another Hit, with Manufacturing PMIs and Central Bank Chatter in Focus

Earlier in the Day:

It was a relatively busy day on the Asian economic calendar this morning. The Japanese Yen and Aussie Dollar were in action, with economic data out of China also in focus.

While the numbers were skewed heavily to the negative, it was “risk-on” after an initial hiccup. Central bank promise of support shifted sentiment early in the session, giving the CSI300 and Nikkei an early boost. At the time of writing, the CSI300 was up by 3.18%, the Nikkei up by 2.04%.

For the Japanese Yen

Capital spending slid by 3.5%, year-on-year, in the 4^th quarter. In the 3^rd quarter, capital spending had jumped by 7.1%.

The Japanese Yen moved from ¥107.671 to ¥107.793 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.30% to ¥108.21 against the U.S Dollar.

For the Aussie Dollar

The AIG Manufacturing Index fell from 45.4 to 44.3 in February, its lowest level since a 44.2 back in June 2015. In January, the Index had fallen from 48.3 to 45.4.

According to the latest AIG Report,

• It was the 4^th consecutive month of contraction for the first time since 2014.
• Only the food & beverage sector avoided a contraction mid-way through the quarter.
• The production, sales, new orders, and export indices fell further into contraction in the month.

According to the ABS, company gross operating profits slid by 3.5% in the 4^th quarter, following on from a 0.8% fall in the 3^rd quarter. Economists had forecast a 2.0% increase.

The Aussie Dollar moved from $0.64931 to $0.65085 upon release of the figures that preceded China’s Manufacturing PMI. At the time of writing, the Aussie Dollar was up by 0.18% to $0.6527.

Out of China

The Caixin Manufacturing PMI slid from 51.1 to a record low 40.3 in February. Economists had forecast a decline to 45.5.

According to the latest survey,

• There were record falls in output, new orders and employment.
• Travel restrictions led to a sharp deterioration in supply chains.
• Business confidence, however, rose to a 5-year high on hopes of an output recovery…

The Aussie Dollar moved from $0.65235 to $0.65167 upon release of the figures.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.24% to $0.6231. The slide comes as the markets expect the dire PMI numbers out of China to materially impact numbers out of New Zealand.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include manufacturing PMI numbers for Spain and Italy.

Finalized PMI numbers for France, Germany and the Eurozone are also in focus.

We would expect Italy, Germany, and the Eurozone’s figures to have the greatest impact. As the coronavirus spreads, a marked deterioration in manufacturing sector activity could force the ECB into action…

Outside of the numbers expect news updates on the coronavirus to also provide direction. We’ve seen the dollar continue to weaken as the market prices in a March rate cut. We could see the EUR cough up early gains, however, should the ECB also step forward.

At the time of writing, the EUR was up by 0.24% at $1.1053.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. February’s finalized Manufacturing PMI is due out this afternoon.

Expect any downward revisions to weigh on the Pound that is likely to be on the more sensitive side later today.

While the markets focus on the spread of the coronavirus and central bank chatter, geopolitics is also in focus later today.

The EU and Britain return to the negotiating table to thrash out a framework for a trade agreement that needs to be in place by June. Updates from the first day of talks will garner plenty of interest…

At the time of writing, the Pound was up by 0.11% to $1.2837.

Across the Pond

It’s a busy day ahead on the U.S economic calendar.

Key stats include the market’s preferred ISM Manufacturing PMI and the Markit’s finalized Manufacturing PMI. Expect the ISM number to have the greatest impact.

Going into the start of the week, the bets are for a 50 basis point rate cut later this month, which hit the Dollar hard this morning.

Bets could shift should the ISM numbers paint a different picture ahead of the labor market numbers on Friday…

The Dollar Spot Index was down by 0.20% to 97.937 at the time of writing.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats to provide direction.

While the BoC is in action on Wednesday, a jump in crude oil prices and a slide in the Greenback gave the Loonie a boost early on.

Expect risk appetite and central bank chatter to continue to influence throughout the day.

The Loonie was up by 0.43% at C$1.3350 against the U.S Dollar, at the time of writing.