U.S. DOLLAR BASHING CONTINUES INTO 2018

Earlier in the Day:

Key macroeconomic data released through the Asian session this morning included December manufacturing PMI figures out of Australia and China.

Australia’s AIG Manufacturing Index slipped from 57.3 to 56.2 in December, though the level was considered to be a positive, with all seven activity sub-indexes in expansion in December, with production activity, inventories and supplier deliveries rising at a quicker pace. The pace of expansion for new orders, employment, exports and sales all moderated however. By sector, six of the eight manufacturing sub-sectors expanded, led by the F&B sector.

From an inflation standpoint, input prices and wage growth eased, while manufacturers were able raise selling prices in December, which will be some good news for the RBA, though the easing in wage growth will remain a concern.

The AUD moved from $0.78013 to $0.78041 upon release of the data, with concerns over the softer increase in new orders and weaker wage growth negative takeaways from the figures.

Out of China, the Caixin Manufacturing PMI impressed, rising from 50.80 to 51.5, coming off the back of the government PMI numbers released on Sunday, which reported slightly slower activity, the index falling from 51.8 to 51.6.

The Caixin Survey figure was the highest since August, with strong output, export sales and new orders contributing to the rise, both of which suggest that the Chinese economy was far from slowing at the end of the year.

The positive figures out of China and relatively upbeat figures out of Australia eventually spurred the Aussie Dollar into life, with the Aussie Dollar up 0.44% to $0.7839 at the time of writing, with further gains in commodity prices playing their part through the session.

Elsewhere, the Yen was down 0.07% to ¥112.71 against the Dollar, though volumes were on the lighter side with Japanese markets closed until later in the week.

In the equity markets, the ASX200 ended the day down 0.06%, while the Hang Seng and CSI300 had a far more convincing start to the year, surging 1.76% and 1.23% respectively at the time of writing. The tech and energy stocks were among the leaders on the Hang Seng, supported by the better than expected PMI numbers out of China.

The Day Ahead:

Economic data scheduled for release out of the Eurozone this morning includes December’s finalized manufacturing PMI numbers. Based on forecasts, the figures are expected to be EUR positive, but with the EUR up at $1.20 levels at the start of the year, any material gains, barring evidence of a pickup in in inflation, will likely be on hold.

Out of Germany, Merkel’s coalition talks and hopes of a coalition by mid-January may well be too optimistic, with SDP demands being considered too much. If the CDU and CSU go for a minority government, that could be the end of Merkel’s position at the top. The EUR has shown little response to the lack of progress to-date, likely to be down to the fact that the German economy has continued to perform in spite of the country’s political woes.

At the time of writing, the EUR was up just 0.06% to $1.2019, with Merkel and Spain adding to the direction through the day.

Across La Manche, the UK’s December manufacturing PMI is scheduled for release. There’s been plenty of debate over the UK economy and what’s on the horizon. While economists went public to say that they had been overly pessimistic on the effects of Brexit on the UK economy, the IMF and BoE certainly see things differently.

This morning’s December PMI will provide some indication on whether there was any slowdown in economic activity at the end of the year. Anything in line with forecasts, which suggest a slightly slower pace of expansion and we can expect support for the Pound, with the Brexit chatter likely to begin building as members of parliament return to office.

At the time of writing, the Pound was up 0.11% to $1.3518, with data likely to be the key driver today.

Across the Pond, stats out of the U.S are limited to December’s finalized manufacturing PMI figure, which is unlikely to have a material influence on the Dollar ahead of tomorrow’s preferred ISM survey based report.

At the time of writing, the Dollar Spot Index was down 0.09% to 92.158 as the Dollar bashing continues into the New Year and perhaps even this afternoon’s manufacturing data will not be enough to stop the Dollar’s demise.

Trump tweeting has gathered pace and, while the U.S President may have delivered on tax reforms, that may be all that is delivered if the democrats continue to shift the balance of power in both houses later on this year.

Threats also linger from Special Counsel Mueller’s investigation and until the markets can be distracted with something positive, material upside for the Dollar looks unlikely for now.

– http://www.nasdaq.com

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