Jobless claims in the United States last week unexpectedly fell with applications for unemployment payments falling to 330,000 against expectations of 355,000 in claims. A survey conducted by HSBC and Markit Economics saw their China Purchasing Managers' Index gain to 51.9 from 51.5 the previous month and indicates that the Chinese economy is improving at a faster rate than many, including ourselves, have expected. The data precipitated a rally in the euro to a high above 1.3390 overnight. Surprisingly, in what could be interpreted as a sign of further weakness, the Australian dollar fell by almost 1% to open this morning at 1.0460.
The expansion of Chinese manufacturing at the fastest pace of growth in two years prompted the Japanese Yen to fall significantly to once again to breach the 90.00 USD/JPY level. The move was aided by comments from Japanese Deputy Economy Minister Nishimura who said that the yen's decline is far from over and that he wouldn't be concerned by USD/JPY at 100. The moves by the new Abe government to introduce “unlimited easing” are beginning to attract global criticism with German Chancellor Angela Merkel saying in Davos. Switzerland, that the Japanese's government's policy of increased monetary easing is a risk to the global economic recovery. The Yen slumped more than 1.5% to trade at 90.10.
U.S. equity markets continue to perform well with the S&P 500 trading above 1,500 today despite a 12% slump in Apple shares to below $455.00 on higher production costs. The company's shares have now plunged more than 35% since hitting a record high in September last year and there is increasing pressure on the company to introduce more game-changing products to revive sales. The company may soon relinquish its position as the world's most valuable company to Exxon Mobil as its share price continues to fall. The S&P 500 has closed flat at 1,494.82. Earlier in Europe, indexes where mixed but both the DAX and the FTSE managed modest gains.
Commodities were mostly unchanged even though strong China data precipitated a rally in other asset classes. The UBS Bloomberg CMCI lost 0.12%. WTI crude has firmed in response to better than expected global economic data to open this morning 0.8% higher at $96.00. Precious metals lost ground with gold falling 1.12% to $1,667 while silver slumped 2.36% at $31.68. Agricultural commodities were mixed while copper fell 0.2%.
EUR/USD continued to find support towards 1.3300 during the Asia session and Europan morning with a mix of buyers liking the Chinese PMI number. However, with risk currencies like AUD and NZD falling the topside seemed to be limited. Even better than expected European PMI numbers could not see the Euro break above the downward resistance line at 1.3340. It wasn’t until the much better than expected US Unemployment Claims 330k that the risk sentiment lifted for the Euro. The solid break above 1.3340 tripped stops with a rush of covering taking the pair to 1.3390 for a moment. However, we have the price back at 1.3370 to close out the day with US equities almost flat now and traders looking at AUD and NZD asking if its a matter of time before the Euro falls or they recover? We favour the Euro falling. The breakout was needed to cleanout some weak shorts. A fall now below 1.3335 will turn us into happy bears.
AUD/USD was on the cycle lower from the Asia opening bell yesterday as the market looked heavy caught by the weight of expected bulls. The better than expected Chinese PMI numbers helped support the currency for a period but once the Chinese equity market started to drift there was nothing for the AUD to grab onto. The break below 1.0530 signalled that today was going to be tough but it wasn’t until the US morning that we saw the pair break into the 1.0400 numbers. Risk currencies like NZD and JPY also under preformed with AUD being the heaviest. AUD/NZD has fallen into the low 1.24’s. Despite the US equity market recovering AUD has stuck towards the 1.0450 low to close the day. Again its a data free day and with the lead we have of the past day it wouldn’t be unexpected for the AUD to continue towards 1.0400 or possibly lower. However, we have fallen for this trap before and will not add to our already shorts positions unless we crack 1.0450 with trailing stops.