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Weak economic releases and Brexit-related uncertainty brought back the bears to the forex yard and dragged on high-yielding currencies like the Aussie, Kiwi, and the pound.

  • Business NZ manufacturing index lower from 53.7 to 53.5 in November
  • Japan’s Tankan manufacturing index maintains 19 reading vs. 18 expected
  • Japan’s Tankan non-manufacturing index improves from 22 to 24
  • Japan’s flash manufacturing PMI higher from 52.2 to 52.4 in Q4 2018
  • Japan’s revised industrial production maintains 2.9% reading in October
  • China’s fixed asset investment (ytd/y) faster from 5.7% to 5.9% in November
  • China’s industrial production (y/y) dips from 5.9% to 5.4% in November
  • China’s retail sales (y/y) slows down from 8.6% to 8.1% in November
  • China’s unemployment rate improves from 4.9% to 4.8%
  • RBNZ considering higher bank capital requirements

Major Events/Reports:

China’s data dump

Data printed earlier today underscored concerns that the U.S.-China trade war is weighing on the world’s second-largest economy.

China’s industrial production, for example, clocked in a 5.4% growth in November after rising by 5.9% in October. Heck, today’s release marks the weakest since February 2016! A closer look tells us that production eased for both mining and manufacturing.

Meanwhile, the retail sales report showed an 8.1% increase from a year ago in November, also slower than the expected 8.8% increase and marks the slowest since May 2003.

The fixed-asset investment data provided some reprieve, showing a 5.9% annualized increase against the 5.7% growth seen in the first 10 months of the year.

Last but not the least is the unemployment rate, which edged lower from 4.9% to 4.8% in November.

Despite the bright spots, the misses in the industrial production and retail sales data reminded market players that the U.S.-China trade war might already be dragging on China’s economic activity.

Not only that, but it also highlighted concerns that the economic slowdown might spread to economies dependent on Chinese demand.

Theresa May…or may not get support from EU peers

For newbies out there, know that the British PM had come to Brussels to get additional “assurances” on the Irish border backstop that might get her Brexit deal through parliament.

But instead of having her back, European Commission President Jean-Claude Juncker reiterated that there won’t be “any form of renegotiation,” and that May might be “fighting hard and bravely but we haven’t seen results.”

Specifically, Juncker said (emphasis mine):

“Our British friends have to tell us what they want, instead of telling us what we want. We often find ourselves in a nebulous, vague debate and it is time we got clarity. Mrs May is fighting hard and bravely but we haven’t seen results. We don’t want the UK to feel there can be any form of renegotiation whatsoever. We can add some clarifications but there will be no renegotiations.”

Overall risk aversion

Weak economic reports from China and Japan, along with Brexit-related uncertainties didn’t help traders who were already reluctant to take risks during the U.S. session.

  • Nikkei is down by 1.46% to 21,496.8
  • A SX 200 is down by 0.37% to 5,615.5
  • Shanghai index is down by 0.57% to 2,619.065
  • Hang Seng is down by 1.37% to 26,159.8

Commodity currencies were also caught up in the risk-averse vibe, with gold barely making it amidst improved dollar demand while crude oil prices lost some of their shine from their gains earlier this week.

  • Gold is up by 0.01% to $1,241.70 per troy ounce
  • Brent crude oil is down by 0.89% to $61.08 per barrel
  • U.S. WTI is down by 0.74% to $52.43 per barrel

Major Market Mover(s):

AUD

Weak economic reports from China took its toll on the Aussie, which would see less activity should China demand less of Australia’s exports.

AUD/USD is down by 34 pips (-0.46%) to .7194; AUD/JPY is down by 43 pips (-0.52%) to 81.65; AUD/CHF is down by 33 pips (-0.46%) to .7150; AUD/CAD is down by 33 pips (-0.34%) to .9616; EUR/AUD is up by 78 pips (+0.49%) to 1.5793, and GBP/AUD is up by 43 pips (+0.24%) to 1.7556.

NZD

The Kiwi was hit by the triple threat of weak Chinese data, overall risk aversion, and Reserve Bank of New Zealand (RBNZ) possibly doubling the capital requirement for its banks.

NZD/USD is down by 57 pips (-0.83%) to .6797; EUR/NZD is up by 153 pips (+0.92%) to 1.6714; AUD/NZD is up by 49 pips (+0.47%) to 1.0583; NZD/JPY is down by 57 pips (-0.89%) to 77.15; NZD/CHF is down by 56 pips (-0.82%) to .6756, and GBP/NZD is up by 128 pips (+0.69%) to 1.8580.

GBP

Juncker’s less-than-promising statements towards May and any form of Brexit deal renegotiation dragged lower against its counterparts.

GBP/USD is down by 28 pips (-0.22%) to 1.2630; GBP/JPY is down by 42 pips (-0.29%) to 143.36; GBP/CAD is down by 19 pips (-0.11%) to 1.6883; EUR/GBP is up by 21 pips (+0.23%) to .8995, and GBP/CHF is down by 27 pips (-0.22%) to 1.2554.

Watch Out For:

  • 7:00 am GMT: Germany’s wholesale price index
  • 8:15 am GMT: France’s flash manufacturing PMI (50.7 expected, 50.8 previous)
  • 8:15 am GMT: France’s flash services PMI (54.8 expected, 55.1 previous)
  • 8:30 am GMT: Germany’s flash manufacturing PMI (51.8 expected and previous)
  • 8:30 am GMT: Germany’s flash services PMI (53.4 expected, 53.3 previous)
  • 9:00 am GMT: Euro Zone’s flash manufacturing PMI (51.9 expected, 51.8 previous)
  • 9:00 am GMT: Euro Zone’s flash services PMI (53.4 expected and previous)