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China's Off'l PMIs Support Risk, Kiwi Takes Hit From Weak NZ Biz. Conditions


Demand for safe haven currencies fizzled away even as U.S. e-mini futures were heavy. Sentiment improved after the release of China's official PMI figures. The data revealed a considerably faster than expected recovery in the non-manufacturing sector coupled with a marginal miss in the manufacturing gauge.

  • Some of the details of the Chinese survey were concerning, as steel PMI plunged to a record low, while accompanying commentary warned that "attention still needs to be paid to imbalances between the recoveries in supply and demand."
  • Offshore yuan caught a bid upon the release of PMI data, but spot USD/CNH failed to sink through yesterday's lows. The yuan fixing offered no real impetus, with the mid-point of permitted USD/CNY trading band set just 10 pips above sell-side estimate.
  • Both yen and greenback underperformed on the back of reduced demand for safe haven assets. Spot USD/JPY operated within close proximity to the Y137.00 mark, which capped gains on Wednesday. The pair's 1-month risk reversal is poised to extend its advance to three consecutive days.
  • The Aussie outperformed in G10 FX space but the kiwi lagged behind owing to a dismal ANZ Business Confidence reading released out of New Zealand. Activity indicators were weak across the board, with the drop in expected profitability particularly pronounced.
  • AUD/NZD climbed to its best levels in two weeks as Australia/New Zealand 2-Year swap spread tightened. Today's data showed that relative momentum in business conditions continues to support the Antipodean cross.
  • On the data front, final UK GDP, German unemployment & flash French CPI take focus from here. Elsewhere, Sweden's Riksbank will announce its monetary policy decision. An overwhelming majority of analysts expect the bank to lift its policy rate by 50bp.

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