FOREX TRADING

PMI Data Across Europe Expected To Confirm Improvement In Economic Backdrop

Market Brief

The USD has started the new year higher (DXY 78.08) and Asian equities are in positive territory after China’s PMI data climbed to 56.1 in December (from 55.7 the month prior). The outperformer amongst the benchmark indices is the Nikkei, up over 1% on the day led by JAL shares after the Japanese government opted to double the credit available to the troubled airline. The state backed Development Bank of Japan has now extended its loans to Japan Airlines to Y200bn, in a bid to avert the carrier filing for bankruptcy as was speculated last week. USDJPY is still hovering around 93.00 levels, but the next major resistance will be at 93.60 where the 200 day moving average now comes in; given the relatively uninterrupted rally we have seen from the 27th November lows at 84.83, it is possible we get some correction on a first test of 93.60.

The cold snap of weather has buoyed oil prices back around the $80 level and most other commodities are following the move higher. Gold has recovered above $1102 levels at the time of writing, and silver has also stabilized around $16.85. The majority of other currency pairs are trading in ranges (EURUSD 1.4258-1.4337 so far today), while the data calendar ahead is predominantly filled with PMI releases across Europe. So far, the Swedbank PMI Survey beat expectations with a 58.2 print against forecasts for 55.8, and in the rest of the session we can expect further PMI numbers from Switzerland (exp: 56.9, prev: 56.9), Germany (exp: 53.1, prev 53.1), and the Eurozone (exp: 51.6, prev: 51.2). This afternoon’s US data includes ISM Manufacturing which is also expected to improve slightly from November’s figures (exp: 54.0, prev: 53.6), and we expect any positive signs of growth in the US to be broadly USD-positive against the major currencies. The US Construction Spending data also due this afternoon has been far more volatile in recent months, but consensus is looking for at -0.5% MoM change after last month’s 0.0% number.

ACM FOREX

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