• 48.3 reading was as expected, up from 48.0 previously    

  • Australian CPI disappoints, hurting rate rise expectations

  • French and German readings also due this morning, US later this afternoon    

  • Dissent levels not quite there in Bank of England minutes due at 09.30

After a day so dull that it verged on the Sisyphean yesterday, we have finally had some overnight movement to get interested in. Chinese preliminary PMI readings for April from the manufacturing sector rose from 48.0 to 48.3 – remaining in contractionary territory. This is the fourth month in a row that this number has been below 50.0, a symbol of deteriorating growth, which increases the chances of additional stimulus from the Chinese authorities in the coming months.

Last week saw the publication of China’s GDP results for Q1 of this year, with output dipping to its slowest level of growth in six consecutive quarters. The economy grew on a year-on-year basis by 7.4%, slightly higher than the consensus estimate of 7.3% – a figure that would have been the lowest growth level since 2010. The 7.4% figure is not a disaster in itself but is a perpetuation of a recent trend of disappointment that sometimes masquerades as impending disaster. A natural slowing of the Chinese economy has been occurring through the past 18 months as Premier Li attempts to re-engineer growth from the characteristics of an emerging market power to one of a developed nation.

The yuan has slipped to a 16 month low after the figure as the PBOC continues to guide it lower. Advance readings of services and manufacturing sector PMIs are also due from France and Germany this morning. One of these countries will be looking to see whether March’s vastly improved growth numbers can be continued while the other will be hoping that a near-term slip is nothing more than a month-long wobble. It is France however, that is the more positive at the moment with German industry nerves – as shown in last week’s ZEW survey – increasing due to the Ukrainian situation and the prospects of deflation within the Eurozone.

Australian dollar has been on a tear this year – up 4.7% against the USD and 3.2% against GBP – but some of the wind was taken out of its sails last night following a disappointing inflation measure. CPI in Australia rose by less than had been expected in Q1, hitting a level of 2.9% vs an expected 3.2%.

Core prices were also lacklustre and have trimmed expectations of any near term rate rise by the Reserve Bank of Australia. Swaps data has seen traders bring in thoughts of just how much interest rates will increase; before, the data markets were looking for 19bps of rate increases this year, this has now slipped to 15bps. Thoughts of rate cuts by the RBA also linger and while Australian data has been very strong through their summer, attention to the downside must also be paid.

The minutes of this month’s shortened Bank of England meeting are due this morning. We expect policy to remain on hold for another 12 months from now but that does not mean that dissenting voices on a number of issues will not come to the fore earlier. The recent dip in inflation to a 4yr low as part of a landscape of rising sterling is cause for comment and I would not be surprised if the MPC issued comment that further gains will be closely watched to prevent further additional slips in the rate of price rises.

These minutes will also provide the back bone of the next Quarterly Inflation Report, due mid-May, and we will be looking for signs of forecast re-appraisal on both growth and inflation measures.

The advance reading of US manufacturing PMI is the highlight of a quiet US session and once again we expect rates to remain especially sideways this session.

Have a great day.

Disclaimer: The comments put forward by World First are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” ie for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.

EUR/USD News

GBP/USD extends sideways grind above 1.2600

GBP/USD extends sideways grind above 1.2600

GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.

GBP/USD News

Gold pulls away from daily highs, holds above $2,200

Gold pulls away from daily highs, holds above $2,200

Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.

Gold News

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase. 

Read more

Portfolio rebalancing and reflation trades emerge into Q2

Portfolio rebalancing and reflation trades emerge into Q2

Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.

Read more

Majors

Cryptocurrencies

Signatures