Article Highlights

  • Chinese HSBC flash manu PMI up from 48.1 to 49.7
  • New Zealand quarterly inflation expectations at 2.4% from 2.3%
  • Japanese flash manufacturing PMI climbed from 49.4 to 49.9
  • Australian MI inflation expectations improved to 4.4%
  • German and French manufacturing and services PMIs to drop?
  • U.K. revised GDP figure due today
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Is risk appetite back in the markets or what? Higher-yielding currencies bounced back to life, particularly when China printed a stronger than expected HSBC flash manufacturing PMI. The index climbed from 48.1 to 49.7 in May, outpacing the consensus at 48.4 and reaching its highest level in five months. Could this be a sign that the slowdown in China is over?

Aussie bulls charged upon hearing the news, pushing AUD/USD past the .9260 area moments after the release. AUD/JPY also chalked up considerable gains as it rallied above the 94.00 major psychological resistance in today’s Asian trading session.

Data from Australia and New Zealand showed improvements in inflation outlook, as Australia’s MI inflation expectations index improved from 4.2% to 4.4% while New Zealand’s quarterly inflation expectations report showed a rise from 2.3% to 2.4%.

Japan’s flash manufacturing PMI also showed a notable improvement, as it climbed from 49.4 to 49.9, just a notch away from indicating industry expansion. This goes to show that the recently implemented sales tax hike hasn’t had a negative impact on the manufacturing sector for the month of May.

Euro pairs might be in for a lot of movement in the next few hours, as France and Germany are set to print their latest manufacturing and services PMIs. Both economies are expected to show small declines for both industries, which might be indicative of a prolonged slowdown in the euro region and remind traders that the ECB is likely to implement further easing next month.

Also due today is the revised U.K. GDP reading, which might stay unchanged at the initially reported 0.8% figure. Any upward revisions though could lead to more gains from the pound, which has already drawn a lot of support from the recent BOE meeting minutes and the strong U.K. retail sales release.

U.S. Session Recap

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