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    Asian Session – China PMI disappoints again; dollar off highs

    The US dollar was slightly off Friday’s highs when it rose by 1% following the Bank of Japan’s surprise cut in interest rates to negative. The unexpected move lifted risk sentiment and increased the monetary divergence between the US and Europe/Japan, putting upside pressure on the greenback.

    Risk appetite eased slightly on Monday on mixed manufacturing PMI data from China. The dollar held above 121 yen in today’s Asian trading, while the euro was steady around 1.0845 dollars. The pound was stronger though versus the greenback, climbing to 1.4261 dollars.

    Asian equities were mostly positive but China’s main indices started the new month in negative territory and ended the day down by around 1.5%.

    China’s official manufacturing PMI slipped to 49.4 in January from 49.7 previously. The figure fell short of estimates of 49.6. The non-manufacturing PMI also disappointed as services activity slowed to 53.5 in January from 54.4 previously. The private Caixin survey showed some optimism though as the manufacturing PMI improved slightly to 48.4 in January, beating estimates of 48.0.

    The Chinese yuan came under pressure from the weak data and edged lower in line with Monday’s weaker midpoint. The People’s Bank of China set Monday’s midpoint at 6.5539 per dollar versus Friday’s fix of 6.5516. Onshore yuan was last trading at 6.5783 per dollar.

    However, the Australian dollar firmed slightly on short covering after the PMI data. The aussie climbed from a low of 0.7041 against the US dollar at the start of Asian trading to around 0.7068 in late session. The Australian dollar is likely to come under focus tomorrow when the RBA will announce its latest monetary policy decision.

    Oil prices were also hit by the disappointing Chinese PMI and were lower by almost 2% on Monday. US crude futures were last trading at $33 per barrel, while Brent crude was down at $35.34.

    The Canadian dollar gave up some of last week’s gains as it retreated to 1.4045 per US dollar on the back of weaker oil prices.

    Coming up later today, final Eurozone PMI numbers will be published along with the UK’s manufacturing PMI for January. It will be a busy day for US data with personal income and spending figures due, along with the ISM manufacturing survey for January.

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