Home Markets Holding Breath

It is a mixed bag as North Americans open this Thursday morning following weaker Eurozone and Chinese economic data. The euro is rising as we go to print after a 0.50% decline in the wake of weaker than expected German private sector growth and French business activity. Factory activity in China contracted at its fastest pace in a year this April which got things moving lower as the Asian session kicked off. The flash PMI fell to a one-year low of 49.2 from 49.6, below expansionary territory as authorities try to rebalance its economy away from exporting to relying more on domestic spending. Earnings season has kicked off in the US and the results have been varied so far, with companies such as Texas Instruments and Facebook missing earnings estimates (with FX being blamed for some), weighing on US futures this morning.

Despite the actions of the People’s Bank of China, which surprisingly slashed its requirement of the cash banks must hold on reserve, it’s been a fairly uneventful week during Asian trading hours. The yen has been retreat for most of the week and has continues its sell-off today as USDJPY finally surpassed the 120 level again. Global equities have all advanced on this week’s surprise RRR cut by the PBOC, as China searches for growth in 2015. The New Zealand dollar was the biggest loser overnight as RBNZ Assistant Governor John McDermott made some waves in a speech, explaining that the central bank would not be considering any increase in interest rates at present. Mr. McDermott also address recent kiwi strength directly, as a rising dollar is unwelcome as export prices fall.

The euro rate slumped to   a low rate of 1.0665 overnight following news that French business activity barely grew in April. French manufacturing and service PMIs barely reached the important 50 level – showing economic expansion – while Germany’s private sector slowed down unexpectedly, at one point pushing EUR/USD 145 points lower off this week’s high rate. Sterling also experienced a brief sell-off one day following the release of unexpectedly hawkish central bank minutes. Less than twenty-four hours following BoE minutes, UK retail sales for the month of March missed badly, coming in with a reading of -0.5% versus expectations closer to +0.4%. Over the same period in 2014, retail sales only grew by 4.2% as the market anticipated a number closer to 5.5%. Cable continues to trade on either side of the 1.50 level but does remain supported from continues selling in the EUR/GBP cross.

Turing to the US, weekly jobless claims rose to 295k this week as more Americans filed first time unemployment papers. The US dollar has been doing its best to fight a decline after housing prices hit an 18-month high with Wednesday’s results. Rising against the so-called commodity currencies this week, the greenback has been fairly unchanged as oil prices have stabilized for the moment after rising most of the month of April. It has been a fairly quiet week in Canada, as economic has been limited. The Loonie, which experienced its most violent increase in months last week, has been trading within a tight range around 1.2250. Bank of Canada Chairman Poloz will be speaking at 10:30am EST tomorrow to close out the week. Technical resistance comes in at 1.2325 while the downside edges closer toward the psychologically important 1.20 level.

Further reading:

US new home sales fall to 481K – 11.4% down

US jobless claims 295K – slightly worse than expected