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The dollar extended its gains from the previous session, but was upstaged by the yen when risk aversion and a few data misses pushed it higher.

  • Japan’s preliminary industrial production drops by 6.6% vs. 4.1% dip expected, 2.9% growth in December
  • Japan’s retail sales (y/y) up by 1.6% vs. 2.3% expected, 3.6% in December
  • Japan’s housing starts (y/y) drops by 13.2% vs. 4.5% dip expected, 2.1% slip in December
  • NZ ANZ business confidence better at -19.0 vs. -37.8 in December
  • AU private sector credit maintains 0.3% growth vs. 0.4% expected in January
  • U.K.’s BRC shop price index slips by 0.8% vs. 0.5% decrease in January
  • China’s official manufacturing PMI slips from 51.3 to 50.3 (vs. 51.2 expected) in February
  • China’s official non-manufacturing PMI eases from 55.3 to 54.4 in February

Major Events/Reports:

China’s manufacturing PMIs

Business survey numbers from the world’s second largest economy caused a few bad moments for investors, as both manufacturing and non-manufacturing PMIs missed their estimates.

Manufacturing PMI dropped to its 19-month low of 50.3 in February AND missed its expectations of a 51.2 reading. No biggie, though, since analysts peg the weakness to the Lunar New Year holiday lull slowing business activities.

Unfortunately, services PMI printed at 50.3, which is a full point weaker than its December reading and marks the slowest reading since October 2017.

Details tell us that new export orders fell for the first time since September 2017 while employment and orders in hand continued their declines.

BOJ’s “tiny taper”

The Bank of Japan (BOJ) waved a red flag to yen bulls today when it cut its purchases of JGBs with 25-40 years to maturity by 10B from 80B JPY to70B JPY. Hey, tightening is tightening, amirite?

Overall risk aversion

China’s data misses, as well as concerns that Powell’s optimism from the previous session would lead to more than three rate hikes this year weighed on the Asian bourses:

  • Nikkei is broke a three-day positive streak with a 1.02% loss to 22,161.0;
  • Australia’s A SX 200 is down by 0.31% to 6,017.0;
  • Hang Seng is down by 1.68% to 30,743.1, and
  • Shanghai index is down by 1.27% to 3,250.149.

Even commodities felt the weight of the dollar strength and risk aversion combo:

  • Gold is down by 0.05% to $1,317.71;
  • Brent crude oil is down by 0.24% to $66.21, and
  • U.S. crude oil prices is down by 0.29% to $62.62.

Major Market Mover(s):

The one-two punch of BOJ’s “tiny taper” and overall risk aversion made the yen the biggest player of the session.

USD/JPY is down by 12 pips (-0.11%) to 107.20;
EUR/JPY is down by 24 pips (-0.18%) to 131.05;
GBP/JPY is down by 22 pips (-0.15%) to 149.01, and
NZD/JPY is down by 15 pips (-0.19%) to 77.48.

The New Zealand dollar extended its losses across the board on the back of overall risk aversion and disappointing PMIs from China.

NZD/USD is down by 6 pips (-0.08%) to .7228;
NZD/JPY is down by 15 pips (-0.19%) to 77.48;
AUD/NZD is up by 10 pips (+0.09%) to 1.0774, and
NZD/CAD is down by 10 pips (-0.10%) to .9232.

Watch Out For:

  • 7:00 am GMT: UBS consumption indicator
  • 7:00 am GMT: Germany’s GfK consumer climate (10.8 expected, 11.0 previous)
  • 7:45 am GMT: France’s consumer spending (0.5% expected, -1.2% previous)
  • 7:45 am GMT: France’s preliminary CPI (0.3% expected, -0.1% previous)
  • 7:45 am GMT: France’s preliminary GDP (q/q) to remain at 0.6%?
  • 8:00 am GMT: Switzerland’s KOF economic barometer
  • 8:55 am GMT: Germany’s unemployment change (-17K expected, -25K previous)
  • 10:00 am GMT: Euro Zone’s flash CPI estimate (y/y) (1.2% expected, 1.3% previous)
  • 10:00 am GMT: Euro Zone’s flash core CPI (y/y) to remain at 0.1?
  • 10:00 am GMT: Italy’s preliminary CPI (0.3% expected and previous)