Forex news for Asia trading Thursday 1 June 2017

  • Goldman Sachs sees AUD/USD falling to high 60s
  • Analyst responses to Australian data coming in - Q1 capex
  • Analyst responses to Australian data coming in - retail sales
  • It looks the Australian Treasurer has hinted at a poor GDP result next week
  • AUD/USD hitting new session lows. Poor China PMI>capex, retail sales
  • China Caixin manufacturing PMI: 49.6 (expected 50.1)
  • More from Fed's Williams: US inflation below 2% is a challenge for monetary policy
  • BOJ's Harada: Nothing decided on future BOJ exit policy
  • Australia - April retail sales: 1.0% m/m (expected +0.3%)
  • Australia Q1 Capex, 'headline' is 0.3% (vs. expected +0.5%)
  • People’s Bank of China sets yuan reference rate at 6.8090 (vs. yesterday at 6.8633)
  • Australian data due at the bottom of the hour: Q1 Capex & April retail sales (previews)
  • Morgan Stanley's CEO positive on economies, but warns on US stockmarket
  • Japan - Nikkei / Markit Manufacturing PMI for May (final) 53.1 ('flash' 52.0)
  • Australia - CoreLogic house prices for May -1.1% m/m
  • Fed's Williams: Unconventional policies will become the norm
  • More on yesterday's BOJ announcement re JGB buying plans for June
  • Japan capex data for Q1: +4.5% y/y (expected +4.0%)
  • PIMCO's 5 significant pivots, & says US recession chance now 70% within 5 years
  • Australia (May) manufacturing PMI: 54.8 (prior 59.2)
  • Australia retail sales data (April) - previews
  • NZ terms of trade data for Q1, up 5.1% q/q
  • Preview - "Your 10-second guide to today's Australian retail sales report"
  • Australian Q1 capex data due today - preview 3 (this one is a quickie)
  • Australian Q1 capex data due today - preview 2
  • Muddy Waters: “Starting to believe that there could be some real problems with Canada”
  • Australian Q1 capex data due today - preview
  • UK poll, Cons 42, Labour 39 (You Gov)
  • ICYMI Forexlive Americas FX news wrap: USD rises against commodity currencies. Falls against the rest.
  • Economic data due from Asia: Japan, Australia capex; BOJ, Fed; China - big day coming
  • Brazil's central bank cuts benchmark interest rate by 100bps
  • Trade ideas thread - Thursday 1 June 2017
  • OIL - Private inventory data shows bigger than expected draw in crude stocks
  • US commerce secretary Ross comment on NAFTA, Canadian lumber, Mexican sugar

The Australian dollar was a big mover today, but I'll come to that.

New Zealand terms of trade and Australian manufacturing PMI kicked the session off, but with little currency impact beyond minor wiggles. Yen moves were more notable then, with USD/JPY moving above 111 in the Tokyo morning. We got better than expected capex data for Q1 out of Japan, which argued for a more positive yen, but this wasn't to be as it lost a little ground. A contributing factor to yen weakness may have been the international securities flows data for Japan, which confirmed a fifth successive week of Japanese buying of foreign bonds. USD/JPY has not managed to sustain above 111 and it soon calmed for a small range on the session.

EURJPY gained too, with EUR/USD confined to a very small range only, USD/CHF also with only small movement. Even cable, which has been active as we move towards the June 8 election was mostly subdued.

The next news to hit was a huge revaluation of the CNY against the USD from the People's Bank of China today, USD/CNY was set (reference rate) at its lowest since early November of 2016. There are various potential factors for the PBOC moving the yuan higher:

  • a response to Moody's downgrade of the country last week (the PBOC/government supporting equities, bonds and currencies in its wake)
  • Another reason for the Bank supporting the yuan directly is with evidence showing growth is slowing (I'll get to today's piece of significant data in just a moment), the pressure will be on the PBOC not to push too hard with their tightening policies (which is yuan supportive to the extent it keeps the interest rate spread to the US wide even as the Fed moves towards further hikes).

And, as I update, its not just the currency on the move, overnight offshore yuan lending rates are surging higher again in Hong Kong today. The overnight rate reported above 42%, one-week above 19%.

Next up was Australian data - April retail sales (a solid beat, see bullets above) and the not as bad as it could have been Q1 capex data (it wasn't great, just not too terrible). The Australian dollar moved higher in the wake of the data .The strength lasted 15 minutes, until the Caixin China manufacturing PMI hit..

And hit it did. The private-survey manufacturing PMI: Caixin / Markit Manufacturing PMI for May came in showing contraction (for the first time in 11 months). Yesterday we got the official PMIs from China, which held up well, despite other private data showing growth slipping in May - see here: Early economic data for May from China shows cooling growth. I was wary of the official data yesterday and mentioned the market would be watching for confirmation (or not) from the private survey. Well, it was 'or not'

The response expressed in the Australian dollar was swift and very harsh. The Australian dollar was hit lower immediately and has barely recovered from its session low as I update. It was a nice example of the market doings its "When the facts change, I change my mind. What do you do, sir?" thing. And also how a trading vehicle behaves when its in a downward trend.

NZD is lower on the day also, but not as much as the Australian dollar. Gold is little changed.

Late NY oil inventory data saw a much bigger draw than expected, helping oil to pop, and it remained near its high through the day.

Regional equities:

  • Nikkei +1.10%
  • Shanghai -0.51%
  • HK +0.28%
  • ASX +0.04%

Still to come: President Donald Trump will announce his decision on the Paris climate accord Thursday afternoon US time