Asian Session Forex Recap – August 1, 2016

  • AU AIG manufacturing index up from 51.8 to 56.4 in July
  • AU HIA new home sales up from -4.4% to 8.2% in June
  • AU MI inflation gauge down by 0.3% vs. 0.6% increase in June
  • China’s manufacturing PMI down from 50.0 to 49.9 vs. 50.1 expected
  • China’s non-manufacturing PMI up from 53.7 to 53.9 in July
  • China’s Caixin manufacturing PMI up from 48.6 to 50.6 in July
  • Japan’s final manufacturing PMI revised from 49.0 to 49.3
  • Japan’s final manufacturing PMI revised from 49.0 to 49.3

Forex price action was a mixed bag of nuts, as today’s economic reports got mixed in with a bit of sentiment trading.

Major Events:

Australia’s data dump – Data from the Land Down Under came in mostly better-than-expected, as the AIG manufacturing index and new home sales shot up in July and June respectively. The MI inflation gauge was a bit of a party pooper though, with its 0.3% decline in June against the 0.6% uptick in May.

This week all eyes will be on the RBA, as the central bank makes its first monetary policy decision since Australia printed its Q2 2016 inflation numbers. Will Stevens and his team pull the trigger on more rate cuts?

China’s PMIs – China’s equities markets defied the generally risk-friendly vibe after the economy printed mixed PMI results. See, the official manufacturing PMI fell into the contraction zone with a 49.9 reading in July (50.1 was expected). A closer look points us to cooling orders and floods disrupting business operations. Not good since China is the world’s second largest economy and a lot of export-related economies are depending on demand from the region.

Luckily, the Caixin reading, a private survey of small-to-medium sized companies, showed a reading of 50.6 after clocking in a 48.6 figure in June. The official non-manufacturing PMI numbers also helped ease the sting after it improved from 53.7 to 53.9 last month.

Fed’s Dudley doesn’t rule out a rate hike – The Greenback found a bit of momentum in early Asian trading, as New York Fed William Dudley hinted at a rate hike this year. In a conference in Bali, he stated that it’s “premature to rule out further monetary policy tightening this year.

Apparently, investors are underestimating the possibility of Uncle Sam growing faster than what the market has priced in and that, if the incoming information validates his outlook, then the Fed would need to move at a faster pace. He said he expects the economy to grow by 2.0% over the next 18 months, as the labor market tightens and inflation picks up. Watch your dollar trades closely, folks!

Major Market Movers:

AUD – The Aussie gained a few pips on its counterparts, as strong tier 2 reports from Australia trumped mixed data from China.

AUD/USD is up by 17 pips (+0.22%) to .7612, AUD/JPY is up by 34 pips (+0.44%) to 77.93, and EUR/AUD is down by 28 pips (-0.19%) to 1.4686.

JPY – Thanks to a bit of risk appetite and start-of-month optimism, the low-yielding yen gave up a pip or two against its counterparts.

USD/JPY climbed by 23 pips (+0.23%) to 102.39, EUR/JPY gained 28 pips (+0.25%) to 114.45, and GBP/JPY jumped by 46 pips (+0.34%) to 135.70.

Watch Out For:

  • Switzerland on Independence Day holiday
  • 8:15 am GMT: Spanish manufacturing PMI (51.6 expected, 52.2 previous)
  • 8:45 am GMT: Italian manufacturing PMI (52.5 expected, 53.5 previous)
  • 8:50 am GMT: French final manufacturing PMI (expected to remain at 48.6)
  • 8:55 am GMT: German final manufacturing PMI (expected to remain at 53.7)
  • 9:00 am GMT: Euro Zone final manufacturing PMI (expected to remain at 51.9)
  • 9:30 am GMT: U.K. manufacturing PMI (expected to remain at 49.1)

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