Key Notes for December 16th
- China HSBC manufacturing PMI 49.5 vs. 49.8
- French flash manufacturing PMI 47.9 vs. 48.6; services PMI 49.8 vs. 48.5
- German flash manufacturing PMI 51.2 vs. 50.3, services PMI 51.4 vs. 52.5
- Eurozone flash manufacturing PMI 50.8 vs. 50.5, services PMI 51.9 vs. 51.5
- UK core CPI y/y 1.2% vs. 1.5%, headline CPI y/y 1% vs. 1.2%
- German ZEW economic sentiment 34.9 vs. 19.8
Market volatility picked up since early Asian trading with the Yen gaining broadly across the board and the US Dollar easing its gains momentarily against most of the peers. The USDJPY hit intraday lows to 115.562 before easing back higher into the US trading session.
Weaker than expected manufacturing PMI from China only helped to alleviate fears as markets are now convinced that the PBOC could initiate further easing measures amidst a slow down. The Aussie and Kiwi dollar was seen to be trading within a tight range, with the Aussie especially dropping briefly to 0.82 before managing to push higher from the yearly lows. The RBA minutes did not contain anything new for the markets besides the usual rhetoric.
The major news for the day was the Russian Central Bank rising interest rates to 17% to curb the Ruble’s decline against the US Dollar and the Euro. The efforts were only short lived as USDRUB turned around to make a new high towards 73 levels intraday. Key monetary policies from Central banks from Hungary and Sweden saw a flight to safety with the Euro well supported by inflows. Flash PMI’s from France and Germany remained mixed but did not deviate much from expectations which was supportive of the Euro. The German ZEW economic sentiment rose to 34.9, beating expectations calling for a rise to 20. Eurozone ZEW sentiment also improved, rising 31.8 vs. 20.1 expectations.
The British Pound started weaker declining intraday to lows of 1.561 on weaker than expected CPI data which declined both on the headline and core reading on a year on year basis. The Cable however managed to shrug off the weak fundamentals and soon rallied to make an intraday high to 1.578 at the time of writing.
Oil exporting currencies saw another day of decline with the NOK plummeting close to 4% and a broadly weaker Canadian dollar, with the USDCAD trading near the highs of 1.16. Gold futures also reflected the broad theme fluctuating between the range of 1193 and 1215 ahead of the US trading session open. With the exception of the US housing data and manufacturing PMI from the US, the fundamentals are not expected to bring any significant shifts in the markets.
The market volatility comes as the FOMC starts its two day meeting with expectations for the statement to signal the Fed’s intentions of starting to hike interest rates, which incidentally could come at a risk considering the continued fall of Crude oil prices and the potential impact it could have on emerging market currencies which have already weakened considerably.
