Market Drivers for March 24 2014

Aussie recovers after weak Chinese PMI

EZ Flash PMI show France recovering while Germany misses

Nikkei 1.77% Europe -.84%

Oil $99/bbl

Gold $1324/oz.

Europe and Asia:

CNY HSBC Manufacturing PMI 48.1 vs. 48.7

EUR EZ PMI Svc 54.0 vs. 55.8

EUR EZ PMI Man 53.8 vs. 54.7

North America:

USD Flash Man. PMI 9:45 AM

The flash PMI picture out EZ was mixed today with French data providing a strong upside surprise while German results disappointed creating seesaw action in the EUR/USD on the first trading day of the week. The euro first shot up to 1.3820 when French PMI printed their best results in 17 months as both services and manufacturing moved squarely into expansionary territory. But the enthusiasm was short lived after German data missed its mark sending euro to fresh session lows of 1.3768.

The big surprise today was the rebound in French numbers as PMI Manufacturing printed at 51.9 vs. 49.8 eyed and Services came in at 51.4 vs. 47.9 eyed. The near 4 point jump was a massive improvement in French economic activity suggesting that after months of lagging, Europe’s second largest economy may be starting to finally rebound. If this trend proves to be durable France would stop acting as an anchor on EZ growth and could provide further support to recovery in the region.

The positive news from France however, was offset by the miss in German data which saw PMI Manufacturing print at 53.8 vs. 54.7 and Services slip to to 54 from 55.8 eyed. Although still comfortably above the 50 boom/bust line, the German data declined sharply from the month prior indicating that stronger euro and the rise in geopolitical tensions clearly took its toll on German industry in March.

European monetary officials continue to talk down the unit, pointing out that the ECB policy remains squarely on the side of easing, but unless the central bank decides to act at the next meeting in April the market is unlikely to drive EUR/USD much lower on rhetoric alone. Today’s data although and overall miss does not suggest a significant deterioration in economic conditions and therefore leaves open the question of further action from the ECB.

Meanwhile in Asia the HSBC PMI Manufacturing report also missed its mark printing at 48.1 versus 48.7 sending Aussie to a session low of 9045. But the unit quickly rebounded as bargain hunters stepped in and rumors circulated that the latest batch of weak economic data will force the PBOC into an easing mode. The Aussie rose to a high of 9114 in European session and remains well bid as currency traders continue to see Australia’s economic fortunes decoupling from those of China.

In North America today the only report of note is the US Flash Manufacturing PMI report due at 13:45 GMT. The market is looking for a slightly weaker reading of 56.6 versus 57.1 the month prior, but given the improvement in Empire and Philly Fed numbers the prospect of an upside surprise is there. USD/JPY, after a few days of weakness that pushed the pair to a retest of 102.00 level has traded much better today rising to 102.50. If the PMI data today proves supportive it may provide the trigger for further upside and a test of the 103.00 level as bulls begin to take charge,

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