This morning China came with a set of data, possibly anticipated by investors and partially integrated into the markets. The manufacturing PMI rose to 49.9 points, Non-Manufacturing PMI increased to 53.9 points, HSBC Final Manufacturing PMI advanced at 50.7 points and the Peoples Bank of China announced they are cutting benchmark interest rates by 0.25%. The Chinese recovering process is clearly in progress and the local stock market is gaining momentum along with the increasing monetary stimulus measures.
The Australian and New Zeeland dollar already lost some ground as a reaction to the Chinese news. However, the local support levels (0.7500 for NZDUSD and 0.7650 for AUDUSD) seem fragile as the Reserve Bank of Australia meeting in Melbourne this week is expected to announce a cut in interest rate to 2% from 2.25%.
Obviously, a new stormy week is laying ahead, in which the ECB’s monetary policy meeting will be the main attraction. The European authorities may start buying securities as part of its QE program on the 9th of March, while they are also expected to raise GDP growth estimates and reduce the inflation expectations. The EURUSD currency pair is trading near the 1.1180 low as investors were encouraged to trust the American dollar as per the CPI/Bullard duet, but it’s probably a matter of time until the situation will counterbalance.
The price of gold is reaching the 1220 dollars per ounce local high as China announces the interest rate cut and after Indian Finance Minister Arun Jaitley surprised jewellers by maintaining the import duty at a record level of 10% in Saturday’s budget. The macroeconomic climate heats up this week for financial markets so it won’t be a surprise to see the price of gold advancing to new local highs near the 1235 dollars per ounce level.
The price of WTI is being maintained around 50 dollars per barrel while the price of Brent is located near the local high at 62 dollars per barrel. OPEC has announced a fall in its exports as unrest in Lybia and bad weather delayed exports from the southern ports of Iraq. In any case, in Saudi Arabia the production has slightly increased, fact that demonstrates they are sticking to their strategy of focusing on market share rather than cutting output. Light corrections may come up on the WTI and Brent prices and the local range movements may be continued.
Other important events this week will be the CPI Flash Estimate report for the euro zone today, the Fed Chair Yellen speaks on Wednesday, the announcement of the overnight rate in Canada, the official bank rate announcement in England on Thursday and the NFP report on Friday.
