Upbeat overnight sentiment dissipated throughout the session as disappointing Eurozone PMI data, BoJ source comments and US ISM guided price action
Overnight, sentiment was initially relatively positive across the market in the wake of a slew of data points from the Asia-Pacific region. Such data points included Chinese official and Caixin manufacturing PMI which both exceeded expectations, while the BoJ Tankan Capex data also helped to bolster the tone overnight. Furthermore, Japanese lawmaker Yamamoto continued to call for BoJ easing at the end of the month, which allied with the data points, helped prop-up equity markets and see an unwinding of some of the recent safe-haven flows into EUR and JPY while supporting AUD.
This theme initially continued heading through the European open; however, this sentiment was relatively short-lived as a slew of lacklustre Eurozone PMIs painted a less upbeat picture of the regional economy. This set the tone for the remainder of the session and subsequently saw a reversal of some of the overnight price action with BoJ source comments saying that the central bank see few reasons to increase stimulus, further exacerbating price action.
In terms of US data points, the weekly jobs data failed to impact the market, despite continuing claims falling to their lowest level since November 2000 (2191k vs. Exp. 2230k). Elsewhere, US manufacturing PMI was relatively in-line, however, the ISM Manufacturing data came in lower than expected to see its lowest reading since May’13. As such, USD came off its best levels to see USD-index fall into the negative territory before the European close, led by USD/JPY weakness amid a continuation of recent safe haven flows, combined with sources suggesting the BoJ see limited reasons to increase stimulus.
Looking ahead, tomorrow’s highlight comes in the form of the US nonfarm payrolls report, with participants also looking out for Japanese jobless rate, Australian retail sales, UK construction PMI and US factory orders as well as comments from ECB’s Draghi and Couere, Fed’s Rosengren, Harker, Bullard, Mester, Fischer and Kocherlakota.