- French Flash Services PMI: 52.3 actual v.s. 51.7 expected, 51.9 previous
- French Flash Manufacturing PMI: 50,7 actual v.s. 50.2 expected, 50.6 previous
- German Flash Services PMI: 55.2 actual v.s. 53.9 expected, 54.1 previous
- German Flash Manufacturing PMI: 51.6 actual v.s. 51.7 expected, 52.3 previous
- Euro Zone Flash Services PMI: 54.2 actual v.s. 53.5 expected, 53.7 previous
- Euro Zone Flash Manufacturing PMI: 52.0 actual v.s. 51.7 expected, 52.0 previous
- PBoC cuts one-year lending rate by 25 bps to 4.35%
- PBoC cuts deposit rate by 25 bps to 1.5%
- Pboc cuts reserve ratio by 50 bps
- Canadian inflation readings coming up
Most currency pairs were range-bound during today’s morning London forex session, with the Kiwi and the Japanese yen as the only clear movers. The Aussie later got a volatility injection, however, thanks to another surprise rate cut from China. Yippee Ki Yay!
According to the google-translated announcement straight from the People’s Bank of China, the cuts were meant to “to maintain reasonably adequate liquidity in the banking system, guide steady moderate growth of money and credit,” and forex traders were probably pricing that in as good for the commodity currencies, especially the Aussie since Australia is a major trade partner of China and the loose policy would (hopefully) spur growth in the slowing Chinese economy, increasing demand for commodities such as Australian iron ores in the process.
The bullish momentum was short-lived, though, since Aussie pairs later began giving back their gains, probably because many forex traders wanted to avoid weekend risk. It is a Friday after all.
AUD/USD is up by 6 pips (+0.08%) to 0.7276 with 0.7296 as session high, AUD/CAD is up by 13 pips (+0.14%) to 0.9510 with 0.9535 as session high, AUD/CHF is up by 8 pips (+0.11%) to 0.7082 with 0.7119 as session high
The Kiwi is a commodity currency, too, and New Zealand exports a lot of its dairy products to China, but the rate cut didn’t significantly alter the Kiwi’s price action since it seems like forex traders were more intent on keeping the Kiwi down.
There weren’t any catalyst for the Kiwi’s overall weakness, but since it’s the end of the week and most Kiwi pairs had a strong week, it’s probably safe to assume that forex traders were just taking some delicious profits off the table or unwinding their positions to avoid weekend risk.
NZD/USD is up by 50 pips (-0.74%) to 0.6788, NZD/JPY is up by 64 pips (-0.79%) to 81.89, NZD/CAD is up by 45 pips (-0.54%) to 0.8884
As for the yen, it was actually pretty strong at the start of the forex session. Most analysts attributed demand for the yen to Etsuro Honda’s statement that the Bank of japan has no immediate need to ease policy. Honda’s words have weight because he is a special adviser to Prime Minister Shinzo Abe and he is one of the architects of the so-called Abenomics.
The yen’s strength later got sapped, however, when China announced the rate cuts, as market players dumped the low-yielding yen and rushed to riskier assets such as equities.
As of this write-up, the DAX is currently up by a very solid 3.03% to 10,809.50, and U.S. equity futures were doing pretty well as well, with the S&P 500 futures up by 0.90% to 2,071.50 while Nasdaq futures was up by 1.52% to 4,622.12.
USD/JPY is up by 4 pips (+0.03%) to 120.73 with 120.22 as session low, AUD/JPY is up by 5 pips (+0.06%) to 87.85 with 87.38 as session low, GBP/JPY is up by 15 pips (+0.09%) to 186.03 with 185.25 as session low
The forex calendar for the upcoming afternoon London/morning U.S. session only has the headline (-0.1% expected, 0.0% previous) and core (0.3% expected, 0.2% previous) readings for Canadian CPI on tap as the only potential market movers.
The inflation readings are expected to come out at 1:30 pm GMT, and do note that the headline reading is expected to decrease while the core reading is expected to increase, so we may see some interesting price action from the Loonie.
Aside from Canada’s inflation data, forex traders will also be getting Markit’s flash manufacturing PMI (52.7 expected, 53.1 previous) for the United States at 2:45 pm GMT. It’s rarely a market mover, though, since most forex traders usually focus on the PMI readings from the Institute for Supply Management, but just note that that it’s expected to deteriorate a bit. Stay frosty!
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