China PMI Beats Expectations, UK PMI Next, Portugal to Borrow

The Australian dollar fell on soft housing data but rebounded on slightly strong China PMI. The yen is the top performer while NZD lags. Eurozone PMI egdes up but remains in contraction territory. Awaiting UK Manuf PMI. European traders will continue to focus on Greece and debt auctions. Latest Premium Trades are out.

The official Chinese PMI rose to 50.5 from 50.3, beating the 49.6 consensus. The stronger number is a double-edged sword because it made a near-term cut in Chinese reserve ratios less likely. Chinas finance minister was quoted in the local press saying that although the economy faces headwinds, inflation pressure remains strong.

In Australia, the housing market is a growing concern. The Q4 house price index fell 4.8% y/y compared to the -3.8% expected. A separate survey from HIA on new home sales was also disappointing.

USD/JPY continues to crave out fresh post-intervention lows but fin min Azumi said his stance on intervention is unchanged. The MOF will take decisive action if there is excess volatility. With USD/JPY roughly 130 pips from all-time lows, that could come sooner rather than later.

Even closer to intervention is the SNB as EUR/CHF slipped as low as 1.2032 in Asia-Pacific.

Eurozone manuf PMI came in at 48.8 from 46.9. French manuf PMI slipped to 48.5 in Jan from 48.9. Italy manuf PMI rose to 46.8 from 44.3.

Markets await Portuguese 3 and 6-month bill auctions. It would be a shock if the yields were remotely tolerable.

As always, headlines about Greek PSI and bailout talks will be a chief risk. Look for some clarity about the ECBs Greek holdings and a willingness to take further austerity measures from Greek politicians.

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