2013-06-03 10:33 (UTC)
XE Market Analysis
Manufacturing PMI data was in focus today. China released a mixed batch of releases, with the official reading coming in on the firmer side, but the HSBC reading shower further deterioration. In Europe, manufacturing releases were broadly positive. The eurozone reading was revised up after better outturns right across the euro area. U.K. PMI also beat expectations and there were better than expected releases out of Scandinavia and Switzerland. The dollar was a bit easier overall, but activity was still relatively light as larger accounts were sidelined ahead of key central bank policy meetings later this week. There are also more details to come from the Japanese growth strategy and then U.S. NFP data on Friday.[EUR, USD]
EUR-USD headed to session highs over 1.3040 following eurozone manufacturing PMI data, which was revised up in May to reach 15-month highs. There were better releases right across the euro-area, which underpinned expectations that activity in the eurozone is stabilising. However, it does reduce expectations of more ECB policy action, which is bound to disappoint investors, but should be a near-term positive for the EUR. EUR may have further to run on the topside due to speculative positioning. The latest CFTC data revealed a rise in EUR shorts to 84,644, which was the most bearish since November 20, 2012. A EUR move over last week's highs of 1.3062 will fuel stop loss activity and could set the pair up for a run over 1.3100.[USD, JPY]
USD-JPY headed to intra-day lows just under 100.05. Intra-day accounts sold into strength overnight and early fund names out of Europe continued to reduce short yen positions. The dollar pairing looks vulnerable after it was unable to reclaim 101.00 overnight. Equity markets also experienced more volatility despite more soothing words from Japanese officials, which will to pressure on the dollar pairing. Into the 100.00 there are good bids from option accounts and Japanese importers, which are protecting sell stops layered into 99.90.[GBP, USD]
GBP firmed up amid better than expected manufacturing PMI, which reached its highest level in 14-months. The May headline beat expectations to come in at 51.3 and the April reading was revised up to 50.2 from 49.8 previously. Cable rallied from 1.5260 to 1.5290, though was already on the front foot after the dollar started the session on an easier footing. Overnight, Cable moved up from the 1.5200 region and started the London session around the 1.5225 area and moved gradually higher ahead of the data. The number will add to expectations that the U.K. economy is recovering, though BoE Governor King told the BBC on the weekend that the recovery was still not quick enough.[USD, CHF]
EUR-CHF is trading on a firm footing after it regained its poise Friday, climbing out of the 1.2380 area and pushing back over 1.2450. However, apart from local names supporting under 1.2400 the large majority of flows via the CHF have gone through USD-CHF, leaving a default bid under the cross. There was speculative activity from 1.2430 after the European open, but overall volumes have been light today. SNB's Jordan said on the weekend that the CHF remains strong despite the recent moves, which will reinforce expectations that policy will remain easy when the SNB meet on June-21. However, the pick up in domestic data is likely to rule out any measures to weaken the CHF further. EUR-CHF should remain a buy on dips, with near-term demand likely now into 1.2400-10. Offers are noted from 1.2480 to 1.2500.[USD, CAD]
USD-CAD is on a stable footing following Friday's short covering rally. Ranges were tight overnight since the Asia Pacific open. It pulled back from 1.0375 and headed just under 1.0350 amid better than expected manufacturing PMI data out of Europe. The pair looks as if it will maintain the range trading bias in the near-term. Recent downside tests have been limited by good order flow and the more mixed risk backdrop, which has generally weighed on commodities and capped the upside in stocks. However, USD-CAD moves into 1.0400 and above are a decent hedging opportunity for corporates and this has generally dampened the potential for extended topside moves.