Asia in Negative Despite Strong AU GDP. Manufacturing in Focus today
Stock markets in the US finished on a mixed note with the S&P and the DOW in minus, whilst the Nasdaq managed to take home a 0.3% gain. The US Dollar continued overall on the bid and has shown a solid performance in May on back of re-ignited rate speculation, taking the US Dollar Index 3.1% higher in the month of May. FX markets were on a roller coaster ride yesterday following mixed figures from the US economy, as strong prints in April Personal Spending and Real Consumption was offset by a weaker May Consumer Confidence and a severe drop in the Dallas Fed Mfg Index, also for May. From Canada, GDP figures came out on the soft side and USDCAD posted gains for the third day in a row. The GBP took a beating in the late afternoon as an ICM poll showed a lead for the “leave” side, sending Cable down almost 2 figures.
Overnight, focus was on the Chinese PMI data, which came out more or less as expected. Two manufacturing PMIs were released where one showed a slight expansion while the other showed a slight contraction. Market reaction was quite muted, but biased towards the downside with the JPY on the bid – USDJPY was rejected at Ichimoku Cloud resistance and has sold off, testing the 110-figure this morning. Australia posted strong growth figures for Q1, which triggered bid in the Aussie across the board. AUDUSD closed above the 61.8% Fibo retracement in the 2016 wave yesterday and we could see additional bids taking the pair towards 0.7330 area.
In the European session today, focus will be on the UK Manufacturing PMI for May, which is expected to show a second month of contraction. This is mainly attributed to uncertainty in light of the upcoming BREXIT referendum. Cable has been rangy overnight in a 50-pip range, and we could see the PMI figure to trigger a break of the range.
In the US session, ISM Manufacturing and Construction Spending should be observed (both released at 16CET.) With reginal PMIs in the US fading, we could see the ISM fading a tad, but the question is whether it will still show expansion or not. Consensus is a 50.4 against 50.8 in April, but should the index fall below 50, there will be a short squeeze in the USD. Construction Spending is expected to increase to 0.6% from 0.3% in March derived mainly from spill-over effects from the US housing sector.
In the evening, the US Beige Book will be released, which also should be noted, as it shows how the Fed districts are doing.
Have a nice day.
Get market updates on your email by subscribing to T1 MarketScope weekly newsletter