Article Highlights

  • Japan’s flash manufacturing PMI clocks in highest reading since March 2014
  • Dollar continues to slip on Trump’s protectionist stance
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Another one bites the dust! Dollar bears continued partying in the pip streets even as Asian bourses ended the session with mixed results.

Major Events:

Japan’s manufacturing PMI – Japan’s manufacturing sector started the year on a strong note, as it clocked in its fastest growth reading since March 2014.

Data from the world’s third largest economy showed a manufacturing survey clocking in at 52.8 in January, much higher than December’s 52.4 final reading and the expected 52.3 mark.

A closer look points us to improvements in both output and new orders. Specifically, a “sharp increase” in international demand boosted new export orders to its fastest rate in 14 months. It also didn’t hurt that inflationary pressures had picked up to its fastest pace since March 2015.

The yen didn’t show much reaction to the report though, as it remains to be seen how much the improvements in the manufacturing sector will help boost consumer spending and inflation.

Low dollar, mixed equities – With not a lot of economic reports to price in, Asian session traders focused on details of Trump’s biases and plans that are slowly shaping up.

As I mentioned in my U.S. session recap, U.S. Treasury Secretary nominee Steven Mnuchin hinted that the administration would prefer a weaker dollar. In fact, market bees are already buzzing that Trump’s focus on trade protectionism is one way of weakening the currency and eventually getting a competitive advantage over its trade competition.

Talks of trade protectionism drove investors to safe havens like Treasuries, gold, and low-yielding currencies like the yen. The Asian bourses was a mixed bag of beans though, with Nikkei slipping down by 0.32% thanks to dollar weakness and Japan’s manufacturing sector possibly taking hits from Trump’s protectionist stance.

Meanwhile, Australia’s A SX 200 up by 0.67%, Hang Seng up by 0.26% and the Shanghai index up by 0.10% on the notion that China would benefit from the U.S. pulling out of the TPP by getting some of Uncle Sam’s share of the pie.

Major Market Movers:

USD – The Greenback slid a little lower against its major counterparts on speculations that Trump and his gang have just begun jawboning the currency.

EUR/USD shot up by another 16 pips (+0.15%) to 1.0761, USD/JPY fell by 28 pips (-0.25%) to 112.73, GBP/USD rose by 19 pips (+0.15%) to 1.2522, and USD/CHF dropped by 17 pips (-0.17%) to .9969.

Even commodity-related currencies had a field day against the Greenback. AUD/USD clocked in a 7-pip gain (+0.09%) to .7581 after hitting a session high of .7610, USD/CAD slipped by another 26 pips (-0.20%) to 1.3223, and NZD/USD popped up by 29 pips (+0.29%) to .7242 after hitting a high of .7265.

Watch Out For:

  • 9:00 am GMT: French flash manufacturing PMI (53.4 expected, 53.5 previous)
  • 9:00 am GMT: French flash services PMI (53.2 expected, 52.9 previous)
  • 9:30 am GMT: German flash manufacturing PMI (55.5 expected, 55.6 previous)
  • 9:30 am GMT: German flash services PMI (54.6 expected, 54.3 previous)
  • 10:00 am GMT: Euro Zone flash manufacturing PMI (54.8 expected, 54.9 previous)
  • 10:00 am GMT: Euro Zone flash services PMI (53.9 expected, 53.7 previous)
  • 10:30 am GMT: U.K. Supreme Court ruling over Article 50 trigger
  • 10:30 am GMT: U.K. net borrowing of the public sector

See also:

U.S. Session Recap
London Session Recap

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