Monday 2nd February: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei down 0.70 %, Shanghai Composite lost 1.40 %, Hang Seng declined 0.50 %, ASX gained 0.70 %
• Commodities: Gold at $1281 (+0.20 %), Silver at $17.19 (-0.10 %), WTI Oil at $47.00 (-2.50 %), Brent Oil at $51.70 (-1.40 %)
• Rates: US 10 year yield at 1.675, UK 10 year yield at 1.333, German 10 year yield at 0.304

News & Data:

• Swiss newspaper reports that SNB is operating an unofficial corridor of 1.05-1.10 for EUR/CHF
• China Manufacturing PMI 49.8, Expected: 50.2, Previous: 50.1
• China Non-Manufacturing PMI 53.7, Previous: 54.1
• China HSBC Manufacturing 49.7, Expected: 49.8, Previous: 49.8
• Yuan Weakens Toward Trading Band’s Limit as China PMI Declines (BBG)
• China PMI Falls, Shows Contraction (BBG)
• Asian Stocks Decline for Fourth Day on Global Growth Concern (BBG)
• Deflation the danger as China’s factories struggle (RTRS)
• Oil prices fall after last week’s surge, strike action (RTRS)
• Eurozone alarm grows over Greek brinkmanship (FT)

CFTC Positioning Data:

• EUR net short 185K vs net short 181K prior
• JPY net short 64K vs net short 78k prior
• GBP net short 45K vs net short 46K prior
• AUD net short 49K vs net short 47K prior
• CAD net short 24K vs net short 29K prior
• CHF net short 7K vs net short 10K prior
• NZD net short 4k vs net short 2k prior

Markets Update:

Asian equity markets are mostly lower after disappointing econ data out of China. The official Manufacturing PMI arrived much weaker than expected and the HSBC PMI also missed expectations. Oil prices declined again overnight, while precious metals remained stable.

In FX, EUR/USD had a quiet session. The pair opened higher at the Sydney open, at 1.1310, driven by EUR/CHF buying. It traded up to a high of 1.1325 and then settled back around 1.1310 for most of the session. EUR/CHF turnover was larger than usual, after a Swiss newspaper wrote that the SNB operates an unofficial corridor of 1.05-1.10 to prevent excessive CHF strength. Again, there is no confirmation of this yet, but it would certainly explain the price action in the pair last week. The market reacted by selling CHF at the open and EUR/CHF had a 100 pips gap to the upside. It fell back to 1.04, only to return back to 1.0475 later. Liquidity in the CHF pairs has yet to normalize, so volatility will remain high.

USD/JPY opened sharped lower and large stops were triggered below 117.20. However, the pair quickly recovered and dealers report that large buying from corporate names pushed the pair to a high of 117.85. Meanwhile, AUD traders are eagerly waiting for the RBA rate decision tomorrow. Bank analysts are split on this, with some expecting to see a 25 bps cut tomorrow, while other don’t expect to see one until early Summer. The market is clearly expecting either a rate cut or a shift in the statement that would signal rate cuts in the near future. USD/CAD is back above 1.27. Immediate resistance seen at 1.28, but no significant hurdle seen until 1.30.

Looking ahead, we have a series of Manufacturing PMI data out of the Euro Zone countries, the UK and the US. For a preview of this week’s key data releases and events, see the calendar below.

We wish you a very successful trading week ahead!

Upcoming Events:

• 08:00 GMT – Spanish Unemployment Change (-32.4k)
• 08:15 GMT – Spanish Manufacturing PMI (54.0)
• 08:45 GMT – Italian Manufacturing PMI (48.8)
• 08:50 GMT – French Manufacturing PMI (49.5)
• 08:55 GMT – German Manufacturing PMI (51.0)
• 09:00 GMT – Euro Zone Manufacturing PMI (52.6)
• 13:30 GMT – US Personal Spending (-0.2 % m/m)
• 13:30 GMT – US Personal Income (0.2 % m/m)
• 13:30 GMT – US Core PCE Price Index (0.1 % m/m)
• 14:45 GMT – US Manufacturing PMI (54.1)
• 15:00 GMT – US ISM Manufacturing PMI (54.5)

The Week Ahead (Key Events):

Tuesday, February 03rd

• 00:30 GMT – Australian Trade Balance
• 03:30 GMT – Reserve Bank of Australia (RBA) Rate Decision
• 09:30 GMT – UK Construction PMI
• 15:00 GMT – US Factory Orders
• 21:45 GMT – New Zealand Employment Change & Unemployment Rate
• 23:00 GMT – RBNZ Governor Wheeler speaks

Wednesday, February 04th

• 08:45 GMT – Italian Services PMI
• 08:50 GMT – French Services PMI
• 08:55 GMT – German Services PMI
• 09:00 GMT – Euro Zone Services PMI
• 09:30 GMT – UK Services PMI
• 13:15 GMT – US ADP Employment Change
• 14:45 GMT – US Services PMI
• 15:00 GMT – US ISM Non-Manufacturing PMI
• 15:00 GMT – Canadian Ivey PMI

Thursday, February 05th

• 00:30 GMT – Australian Retail Sales
• 12:00 GMT – Bank of England Rate Decision
• 13:30 GMT – US Trade Balance
• 13:30 GMT – Canadian Trade Balance

Friday, February 06th

• 09:30 GMT – UK Trade Balance
• 13:30 GMT – US NFP & Unemployment Rate
• 13:30 GMT – Canadian Employment Change & Unemployment Rate

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