China PMI Brings Relief
The Australian dollar was the main mover overnight, pushed around by China PMI reports, Q3 trade prices for Australia, and some volatile price action in S&P futures. The official Chinese PMI reading came in bang on consensus at 50.2, climbing back into expansionary territory for the first time in three months. The private sector PMI estimate also brought good news – being revised up from the earlier flash reading. Prices for Australia’s exports dropped sharply in Q3 by 6.4% q/q, perfectly in line with consensus. Movements in spot iron ore prices during the quarter meant this was not a surprise. But quarterly import prices fell further than the market expected, implying that the terms of trade are not deteriorating as quickly as the market had feared, and in theory this could be construed as a modest positive for the Australian dollar. USDJPY crept back above 80.00 ahead of a heavy schedule of US employment data over the next 48 hours. Challenger job cuts, the ADP estimate, and jobless claims data are all scheduled for release today, followed by the all-important BLS payrolls report on Friday. Finally to Greece, newswire reports indicate that Eurozone finance ministers are evaluating whether to continue to repay holders of foreign-law Greek sovereign bonds on maturity. Many of these bondholders escaped a compulsory haircut during the default in March, as CAC clauses could not be retrospectively inserted into these particular bond contracts. The latest twist in the tale suggests that official creditors are unlikely to take a haircut anytime soon, and that imposing further losses on private sector bond holders remains an option.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank