Article Highlights

  • China’s Caixin services PMI slips down from 52.6 to 52.2 in March
  • China’s composite PMI dropped from 52.6 to 52.1 in March
  • Japan’s consumer confidence index pops up from 43.1 to 43.9 in March
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The dollar’s price action was a mixed bag of nuts, as overall risk aversion got mixed in with dollar weakness from the previous session. What’s up with that?!

Major Events:

China’s Caixin services PMI – A private business survey unexpectedly weakened in March and supported speculations that the world’s second-largest economy is moderating after a strong start to the year.

Data printed earlier today saw Caixin’s services PMI come in at 52.2 in March, which is not only weaker than the expected increase to 52.3 and February’s 52.6 reading, but also marks a six-month low for the report.

A closer look tells us that the new business sub-index also fell to its lowest reading since September even as both the input costs and output prices rose to their highest levels in more than a year.

Meanwhile, the composite output index – a measure of both services and manufacturing activity – slipped from 52.6 to 52.1 in March, down 0.5% from February.

All in all, the numbers support claims that while the Chinese economy continued to expand in March, growth in both manufacturing and services industries are starting to slow.

Overall risk aversion – As mentioned in my U.S. session recap, the dollar, equities, and U.S. bond yields all took hits after the FOMC meeting minutes hinted that Fed members are starting to entertain the idea of reducing its monetary stimulus by trimming its $4.5B trillion balance sheet this year. Not only that, but some members also thought that current equity prices are “quite high relative to standard valuation measures.”

Asian session players traded the same stories and added the uncertainty Trump’s meeting with Xi Jinping and lower commodity prices into the mix. If you recall, traders are wary of Trump possibly escalating trade war talks during the meeting.

Nikkei, which got dragged further by a strong yen, slipped by another 1.38% to a four-month low of 18,595.12 by mid-day break. Hang Seng only dropped by 0.64% while Australia’s A SX 200 is also down by 0.48%. Only the Shanghai index caught a break with its 0.11% gain.

Market Movers:

USD – The dollar continued to bleed pips against the European and fellow low-yielding counterparts, but gained a few against the comdolls.

EUR/USD topped at 1.0684 before settling back down to 1.0675, USD/JPY slipped by another 17 pips (-0.15%) to 110.49 and USD/CHF inched 4 pips lower (-0.04%) to 1.0036.

Comdolls – The combo of lower oil prices and China’s disappointing reports dragged on commodity-related currencies during the session.

AUD/USD is down by 35 pips (-0.46%) to .7543, USD/CAD is up by 13 pips (+0.10%) to 1.3440, and NZD/USD dipped by 4 pips (-0.06%) to .6972.

They also lost against the yen with AUD/JPY dropping by a whopping 48 pips (-0.57%) to 83.34, CAD/JPY falling by 21 pips (-0.26%) to 82.21, and NZD/JPY losing 16 pips (-0.21%) at 77.02.

Watch Out For:

  • 6:00 am GMT: German factory orders (3.5% expected, -7.4% previous)
  • 7:15 am GMT: Switzerland’s CPI (0.2% expected, 0.5% previous)
  • 8:10 am GMT: Euro Zone retail PMI
  • 8:30 am GMT: U.K.’s quarterly housing equity injection (-9.5B GBP expected, -10.9B GBP previous)