Jasper Roberts Consulting - Widget

Manufacturing PMI Data In China, Germany and France Keep Currency Traders On Alert

The countdown to the Federal Reserve meeting has begun. The two day meeting is slated to begin tomorrow and conclude on Wednesday and every trader or analyst you ask seems to have a different opinion as to what to expect on Wednesday. Today most of the Asian equity indices are trading in the red despite a positive closing of the US stock markets on Friday.
From the international currency front the US dollar index is trading lower by 0.14% at 80.10 while the euro and the pound are up marginally by 0.13 % and 0.02% respectively. The euro has added 16 points to trade at 1.3758 while the pound has added 10 points at 1.6305. From the eurozone traders have the PMI and the trade balance numbers to be released. Later in the day from the US we have the Industrial production, capacity utilization, empire manufacturing and the Net tic flows numbers.  Considering the aforementioned factors it could be a volatile day for the euro dollar. French and German PMI data could upset the euro today if Germany misses the mark.
Asian markets are trading on a negative note today on the back of unexpected decline in China’s manufacturing index. Further, increasing worries over the action of QE tapering to be taken by the Federal Reserve in its meeting starting tomorrow acted as a negative factor. China’s HSBC Flash Manufacturing PMI declined by 0.3 points to the 50.5 mark in December from 50.8 levels in November after an upward revision.
The Australian dollar hovered near a three-month low on Monday ahead of what could be an eventful week with investors awaiting a key U.S. Federal Reserve meeting, while the New Zealand dollar held firm.  The Aussie went as far as 68.6 on a trade-weighted basis in New York, its lowest level in more than three years. Versus its U.S. counterpart, it was last at $0.8934, having touched $0.8909 on Friday. 
It briefly dipped to $0.8920 after HSBC’s flash report on China’s manufacturing sector showed growth slowed to a three-month low in December. The Aussie dollar is sensitive to news out of China, a key export market for Australia. 
Across the Tasman Sea, the kiwi traded at $0.8255, after recovering from a slide to $0.8198 late last week. Technical support was seen at $0.8260, the 32.8 percent retracement of its October-November sell-off. Offers suspected above $0.8300 were capping gains. 
Speculators anticipate a reading of third-quarter domestic growth due on Thursday could be supportive for the kiwi given that many economists expect it to show that the economy grew at a quarterly rate of 1.1 percent, faster than many other developed nations.  This would underpin the view that the Reserve Bank of New Zealand will raise interest rates early next year. New Zealand’s government is expected to maintain its forecast of a return to a budget surplus by 2014/15 when it announces its midyear budget update on Tuesday, while few anticipate major changes to its bond issuance programme. As a result, the currency impact was seen as limited.