Forex Afternoon Wrap 24th March

Key Notes:

• Japan flash manufacturing PMI 50.4 vs. 52.1
• China HSBC flash manufacturing PMI 49.2 vs. 50.5
• French flash manufacturing PMI 48.2 vs. 48.9
• French flash services PMI 52.8 vs. 53.1
• German flash manufacturing PMI 52.4 vs. 51.5
• German flash services PMI 55.3 vs. 55
• Eurozone flash manufacturing PMI 51.9 vs. 51.6
• Eurozone flash services PMI 54.3 vs. 53.9
• UK CPI y/y 0% vs. 0.1%; Core CPI y/y 1.2% vs. 1.3%
• UK PPI input m/m 0.2% vs. 1.2%; PPI output m/m 0.2% vs. -0.1%
• US CPI m/m 0.2% as expected; Core CPI m/m 0.2% vs. 0.1%

Later

• US Housing price index
• US Flash manufacturing PMI
• US New home sales
• New Zealand trade balance

The Asian markets started the day with some economic releases from Japan and China, both of which fell short of expectations. Japan’s manufacturing PMI fell to 50.4 below expectations, while the HSBC’s flash manufacturing PMI for China also fell to a 11-month low which continues to put pressure on China to stimulate growth. It should be noted that China had revised its GDP outlook for the year few months ago along with embarking on a rate cut on the PBoC’s benchmark interest rates.

Markets were subdued for the most part without much of reaction. The Aussie and Kiwi dollars continued their rally on the risk off mode, briefly trading near the highs of 0.78 and 0.765 respectively. The Japanese Yen remained mixed, mostly weaker across the board but firm against the US Dollar and the British Sterling.

The European markets saw the release of flash and services PMI but none of the data failed to make an impact. The Euro was however continuing to trade strong against the Greenback with intraday prices flirting with the highs of 1.09. The much anticipated meeting between Greece and German leaders did not yield much result although the post meeting press conference saw both the countries seeking to resolve the debt crisis.

From the UK, CPI data was the main risk and the Pound declined across the board as inflation, both on the headline and core fell below estimates. The BoE in its previous reports did warn that there would be a period of low inflation in the short term before prices start to rise. The Pound however saw a sharp selloff across the board, even weakening against some exotic currencies such as the Swedish Krone and the Mexican Peso.

Against the Greenback, the Pound continued to trade within the range of 1.495 and 1.485.

From the US, CPI data was much better as inflation met estimates of 0.2% on the headline and 0.2% on the core. The Greenback managed to post some modest gains. Further economic data from the US is on the tap which includes new home sales and flash manufacturing PMI data.

Various Fed members continue to give their speeches but the markets so far seem to shrug off the comments, but we expect Janet Yellen’s speech later this Friday to be something the markets will be paying attention to.