The overall risk appetite in Asia Thursday was dictated by the Shanghai Composite Index, which pushed into the black during early trading and hence EUR and risk currencies were squeezed a touch higher. The Nikkei Index was on the defensive with additional losses accrued following yesterday’s break back below the 10,000 mark. This weighed on USDJPY and the JPY crosses during the session.
CHina’s HSBC non-manufacturing PMI data which showed a slight deterioration to 53.3 in March from 53.9 last, but was not enough to impact overall currency levels.
Overnight action centred around Europe again with a poor Spanish bond auction (yields back up at pre-LTRO levels and CDS as high as last November) putting the skids under the EUR, sending it to a 3-week low versus the dollar. At least we had a bite of reality when Spanish PM Rajoy told supporters overnight “Spain is facing an economic situation of extreme difficulty, I repeat, of extreme difficulty, and anyone who doesn’t understand that is fooling themselves”.
The ECB left key interest rates unchanged at 1.0 percent yesterday with Governor Draghi considering both upside and downside inflation risks and he repeated concerns over the growth outlook for the Euro zone. On this theme, he commented that talk of an LTRO exit is premature, as is talk of exit strategies from accommodative policies for the time being. Implied quasi-QE and easy liquidity for longer added to the pressure on the EUR.
On the US front, the March non-manufacturing ISM survey fell 1.3 points to 56.0 but the employment sub-component rose to 56.7 suggesting the improvement in the labour market may not have peaked quite yet and hatched further talk of a decent non-farm payroll number on Friday. The ADP employment change was marginally above consensus, coming in at +209k versus +206k but was below last month’s 230k.
Data Highlights
US MBA Mortgage Applications out at +4.8% vs. -2.7% prior
EU ECB leaves interest rates unchanged at 1%
US Mar. ADP Employment Change out at +209k vs. +206k expected and+230k last
US Mar. ISM Non-manufacturing out at 56.0 vs. 56.8 expected and57.3 prior
China Mar. HSBC PMI Non-manufacturing out at 53.3 s. 53.9 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Swiss CPI (0715)
UK Industrial/Manufacturing Production (0830)
GE Industrial Production (1000)
UK BOE Rate Announcement (1100)
US Challenger Job Cuts (1130)
CA Employment Change (1230)
CA Unemployment Rate (1230)
US Initial Jobless Claims (1230)
US Fed’s Bullard to speak (1310)
UK NIESR GDP Estimate (1400)
CA Ivey PMI (1400)
Andrew Robinson,
SAXO BANK