The risk sentiment soured since yesterday on weak US and Chinese data. The Chicago Fed National Activity index turned -0.23 in March from 0.44 last month, while the existing home sales fell -0.6% vs. +0.8% in February. This is clearly in opposition with the new home starts in US, which increased by 7% in March while the existing homes seem to have hard time to be sold.
In China, the HSBC Manufacturing PMI fell short of the market expectations. Chinese manufacturing expansion slowed down to 50.5 from 51.6 last month. In reaction, Asian stock markets lost overnight. Hang Seng fell 1.2%, Shanghai’s Composite slumped 2.2%; Nikkei (-0.35%), Taiex (-0.40%) and Kospi index (-0.35%) followed the bear market.
JPY was bid overnight on the deteriorating risk appetite. USDJPY traded down to 98.98 in US and extended losses to 98.59 in Tokyo. AUDJPY and EURJPY have been among the most hit pairs on the disappointing Chinese PMI. Nikkei reported that the Japanese insurers pivot towards foreign bonds, yet 100-wall appears to be thicker than thought. S&P sees still more then 1/3 chance of Japan downgrade while the Japan ageing industrial trail is shown as significant roadblock to “Abenomics”.
The high volatility registered on Italian Napolitano’s re-election left its place to a quiet trading in Euro ahead of PMI figures scheduled this morning. As the discussions on a possibility of an ECB rate cut gains pace, ECB Coeure’s comments weighed further on Euro-sentiment. Coeure said he didn’t see any improvement since last ECB meeting (nothing more exciting than the obvious reality) and the jittering around an upcoming rate cut sent EURUSD down to 1.3015. However in the European opening, EURUSD registered a decent rally on better-than-expected French PMI.
The bull attempt in Aussie remained capped at yesterday’s 1.0310. AUDUSD sold-off to 1.0221 on global growth concerns, as Chinese and US data were not gratifying news for commodity currencies. The fall was tempered by local importers above 1.0200, yet stops are reported below this level. In New Zealand, NZD was sold ahead of RBNZ policy announcement tonight. The OCR is expected to remain unchanged at 2.5%.
Today the economic calendar consists of Swiss March Trade Balance, Imports & Exports, French March Business Confidence, Italian April Consumer Confidence, French, German and Euro-Zone April (Preliminary) PMI Manufacturing & Services, UK March Public Finances, Canadian February Retail Sales, US February House Price Index, US March New Home Sales and April Richmond Fed Manufacturing Index.