Chinese PMI Higher, Yen Shorts at 5 Year High

The official Chinese PMI rose to the highest level in 7 months. The euro was the best performer last week while the yen lagged. Weekly positioning data showed yen shorts at the most extreme since 2007.

The Chinese manufacturing sentiment index rose to 50.6 in November from 50.2 the previous month. It was slightly below the 50.8 consensus but the second month of expansion after a trough in the middle part of the year.

The pickup in manufacturing suggests the global economy has some momentum so long as US politicians can put the fiscal cliff behind them.

The potential for tax hikes in the US will remain main trading theme in December. Treasury Secretary Geithner warned that negotiations have hit a stalemate and Obama warned of prolonged negotiations.

The focus on US politicians has led to an abundance of headline risk during US hours. The daily press conferences and unscheduled interviews of a multitude of lawmakers can spark turnarounds in sentiment in moments.

Also on the weekend, Germanys Merkel did not rule out the chance of a haircut on Greek debt in 2014 or later, if Greece keeps its austerity programs on track.

Commitments of Traders

Weekly futures positioning data from the CFTC showed a sharp rise in yen shorts and a swift paring of bets against the euro. The yen positions are a warning sign that the trade is growing overcrowded already.

EUR net short 67K compared to 91K last week

JPY net short 79K compared to 51K last week

GBP net long 10K compared to 1K last week

CHF net short 3K compared to 12K last week

AUD net long 77K compared to 65K last week

CAD net long 62K compared to 61K last week

NZD net long 19K compared to 91K last week

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-AB