Market Drivers April 1, 2019
Risk on as Asia data improves
UK PMI hits 13-month highs
Nikkei 1.43% Dax 1.41%
Oil $60/bbl
Gold $1290/oz.
Europe and Asia:
UK GBP UK PMI Manufacturing 55.1 vs. 51.0
EU EUR CPI 1.4% vs. 1.5%
North America:
USD US Retail Sales 8:30
USD ISM Manufacturing 10:00
A trifecta of better data out of Asia helped fuel a risk on rally in FX at the start of the week with high beta currencies gaping higher on the open and USDJPY pushing through the 111.00 figure.
In China, the PMI Manufacturing report rose back above the 50 boom/bust level its best one month rise since 2012. In Korea and Japan, the PMI readings also rose from the month prior although those indices remained in contractionary territory.
Still, the news provided solace to the market suggesting that the slowdown in Asia may have stabilized and that global growth in Q2 could improve. The upside surprise put a bid into the typical risk-on currencies with Aussie rising to a high of .7131 in early European trade while USDJPY remained well bid at the 111.00 through Asia and EU dealing.
In UK the PMI Manufacturing data was also surprisingly better with the gauge rising to 55.1 from 51.0 forecast. The move was largely due to massive inventory increases as UK producers stockpiled with frenzy ahead of the Brexit deadline. The data could see an unwind over the next few months as producers work off the inventory glut, but the news was received well by the market which kept cable near the 1.3100 all morning long. The focus will now shift back to the political as UK Parliament engages in a series of indicative votes to see if there is any possibility of a compromise on the deal.
The risk on flows will see a true test in US session today as markets will get a look at the US Retail Sales and ISM Manufacturing data. For the “bottom is in” thesis to truly take hold US data must confirm the rebound as well. The markets are actually looking at a slight slide in US Retail Sales to 0.4% from 1.1% the month prior while the manufacturing gauge is expected to stay the same. If the US numbers surprise to the upside as well, the risk on flows could extend with USDJPY making a run for 111.50 while Aussie tries to recapture the .7150 zone but any negative surprise could take US yields lower once again and create yet another false move at the start of week’s trade.
