Buying dips on the GBPAUD looks attractive today after poor Chinese manufacturing data has continued to keep the AUD pressured. 2.1206 – 2.1175 is a good confluence range for longs. Keep in mind it is Friday and many traders will be reluctant to enter into positions ahead of the weekend.
Current Market Sentiment:
Yesterday’s New York trading saw the initial USD weakness reversed and the greenback moving to new highs on the day. US Jobless claims came in much better than expected. Auto retooling, and related temporary layoffs is always a major wildcard for jobless claims in July and likely played some kind of a role in the surprising 26,000 fall in initial claims in the July 18 week to 255,000, a 42 year low. Looking at the 4 week average to smooth out volatility helps to get a better picture, down 4,000 to 278,500, showing a nominal change when doing a month-ago comparison. This report will likely raise speculation for an upside surprise in July employment, however as we mentioned previously, jobless claims data is very difficult to interpret this time of year and there is no guarantee of correlated strength for the monthly Jobs print.
During Asia the NZD continued to fall from it’s highs settling back in after strong rallies following the less aggressive rate decision and statement from Wheeler on Wednesday.
The GBP stabilized after being under pressure during most of the New York session due to worse than expected UK Retail Sales data that printed at -0.2% versus the expected 0.4%. With no change in the bigger fundamental picture and the BOE still looking to begin tightening in early to mid 2016 , we are viewing this GBP weakness as an opportunity to get a better price for longs as we remain bullish the Sterling medium term.
The AUD remained pressured after Chinese manufacturing activity hit a 15 month low when the preliminary July PMI printed at 48.2 suggesting that the world’s second largest economy is struggling to stabilize and has yet to gain momentum even in the face of several rounds of interest rate cuts.
Risk events for today’s London session include the French Flash Manufacturing and Services PMIs, and the German Flash Manufacturing and Services PMIs. (find out more about today’s risk events here)