Market Drivers for July 24, 2013
Aussie hit by weak Chinese PMI data as 9200 falls
Euro hits fresh monthly highs as PMIs cross 50
Nikkei -0.32% Europe 0.66%
Oil $107/bbl
Gold $1340/oz.

Europe and Asia:
AUD Consumer Prices Index 0.4% vs, 0.5%
JPY Merchandise Trade Balance -0.60T vs. -0.58T
CNY Flash Manufacturing PMI 47.7 vs. 48.6
EUR German PMI Services 52.5 vs. 50.9
EUR German PMI Manufacturing 50.3 vs 49.3
EUR Euro-Zone PMI Services 49.6 vs. 48.9
EUR Euro-Zone PMI Manufacturing 50.1 vs. 49.1

North America:
USD Markit US PMI Preliminary 8:58
USD New Home Sales 10:00

The euro hit fresh monthly highs while Aussie stumbled in a lively midweek trading session in the currency market that saw a fair amount of volatility amidst a heavy deluge of data. In Asia the Aussie initially spiked higher taking out the 9300 barrier after CPI figures showed that core inflation was in line at 0.5%.

The news sent the Aussie higher on the assumption that modest price pressures would keep the RBA from cutting the benchmark by another 25bp at the upcoming meeting in August. The euphoria didn’t last long however, as the release of the Chinese PMI Manufacturing data took the steam out of the rally.

The HSBC Chinese PMI came in at 47.7 versus 48.6 – its worst reading in 11 months as operating conditions have deteriorated at the quickest pace since last August. The majority of activity sub-indices declined, including total orders, employment, production and work backlogs, although some analysts found a ray of sunshine in the fact that new export orders rebounded to 47.7 from 44.9 the period prior.

Nevertheless this was a very weak release that suggested Chinese industrial output is clearly slowing and will therefore have negative impact on demand for Australian commodities. Little wonder then that Aussie slid in the aftermath of the news dropping through the 9200 level before finally finding some support.

The news out of Europe was decidedly better with EZ Flash PMI Manufacturing data popping above the 50 boom/bust line for the first time in two years. The improvement in Manufacturing was driven by Germany and the periphery economies indicating that the region’s long drawn out recession may be coming to an end.

The EUR/USD popped on the news running through the barriers at 1.3250 but has since stalled near 1.3240 as its awaits North American flow. In US today, the market will see the release of the flash PMI data and the New Home Sales report. Housing data has been disappointing, but the market anticipates a slight uptick in New Homes to 482K fom 476K the month prior. If the data meets or beats, USD/JPY could extend its recovery and push towards 100.50 as the day progresses.

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