Intraday Market Thoughts

China PMI Stuck Under 50, UK Retail Sales and Greek PSI in Focus

by Adam Button
Jan 20, 2012 9:07

Chinese manufacturing sentiment was in negative territory for the third straight month in the January HSBC PMI. The yen is the early leader while CAD trails. UK retail sales and Greek debt swap negotiations will be the focus of European trading. Latest Premium trades (issued last night) are modestly bullish euro. They also include 4 charts on euro and US crude oil.

Manufacturing sentiment in China improved ever so slightly to 48.8 from 48.7 but remains below the 50 threshold of expansion/contraction, according to HSBC data. The survey is a solid predictor of the official figures to be released later in the month.

The HSBC figures -- and some disappointing earnings at the end of US trading -- translated into a mild, early round of risk aversion.

Focus on Chinese policymakers is adding to that tone. The market has been watching to see if the PBOC would cut reserve ratios before the Lunar New Year holidays begin on the weekend. A cut could still be announced but it is increasingly unlikely. With Chinese markets virtually closed for the week; that pushes the timeframe for cuts into February. In the interim, market participants will be scouring the Chinese press for hints about the policy bias of leaders. Any sign of reluctance to cut rates will weigh predominantly on the Australian dollar, while a surprise cut would boost AUD.

The top release of the European session comes at 0930 GMT when the UK releases December retail sales. The consensus is for a 0.6% rebound after a 0.4% contraction in November.

The ebb and flow of euro trading is likely to be dictated by Greek haircut negotiations. Much of the euro rebound of the past week was predicated on a successful outcome. Although that continues to be the base case of most traders, the risks of another breakdown grow as every minute passes. These negotiations have been littered with rumours and false dawns.

Look for trustworthy sources and check twitter @alaidi or @FX_Button for confirmed developments.

The latest Premium trades include 4 charts on US crude oil and EURUSD, taking cautious positioning in EURUSD & EURJPY, with a new focus on US crude oil and AUDUSD. Direct Access to these trades is found here: To subscribe, click here:


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