Intraday Market Thoughts

USD Recovers Ahead of NFP, Tankan Next

by Adam Button
Mar 31, 2016 22:40

The US dollar was battered in European trading but finally found some support ahead of non-farm payrolls.  The Swiss franc was the top performer while the yen lagged. The critical Q1 Tankan survey is due up next nefore China's PMIs. After closing the Premium EURUSD long with 188 pip gain, a special note on why tomorrow's March NFP will surprise has been issued to Premium clients. The chart below describes this statistical anomaly with full details/analysis found in the latest Premium section. 

USD Recovers Ahead of NFP, Tankan Next - March Nfp Surprise Mar 31 Sm (Chart 1)

The first quarter wrapped up with choppy reversals in US trading as the Dollar regained its footing after hitting fresh cycle lows on a few fronts.

Economic data was mixed. Initial jobless claims deteriorated to 276K from 265K and that sent a mild shudder through the market ahead of tomorrow's non-farm payrolls report. It was balanced out by the Chicago PMI, which improved to 53.6 from 47.6 and beat the 50.7 consensus estimate.

The US dollar bottomed for the day shortly after the Chicago PMI. EUR/USD had risen above 1.14, taking out the Feb high of 1.1376 but then retreating to close at 1.1378. The lack of follow through higher ahead of NFP isn't a big surprise. The market will want to wait-and-see the number – and especially the wages number – before making a definitive break.

The Canadian dollar was whipsawed. USD/CAD dropped to 1.2855 after Canada's Jan GDP report showed 0.6% growth compared to 0.3% expected. The move later reversed and more to finish at 1.3000, in part because the report is dated and in part because oil prices gave up gains. Quarter-end no doubt played a factor as well.

Early in Asia-Pacific trading the Fed's Dudley said the US economy was in a relatively good place and that fears of runaway inflation have proven unfounded. Those two statements offer something for everyone but moved the market little.

The major report to start the quarter in Japan is the Q1 Tankan at 2350 GMT. The large manufacturing index is expected at +8 from +12 in Q4. All industry capex is forecast to fall 0.7% while the small manufacturing index is expected at -2. The deteriorating numbers ratchet up the pressure on the government and BOJ to reach back into their bag of tricks.

The other main event to watch is the China manufacturing PMI at 0100 GMT. The consensus call is a small improvement to 49.4 from 49.0 but that could have an outsized impact on markets is China breathes a sigh of relief after a tough quarter. Watch the Caixin PMI 45 minutes later to confirm the result. It's forecast at 48.3 from 48.0.

Q1 performance JPY +6.8% EUR +4.8% CAD +6.4% GBP -2.5% Gold +16.2% S&P 500 +0.77% UK FTSE -1.1% German DAX -7.2% Nikkei 225 -11.9% Shanghai Comp -15.1%   

Act Exp Prev GMT
Nonfarm Payrolls (MAR)
205K 242K Apr 01 12:30
Markit Manufacturing PMI (MAR)
51.4 Apr 01 13:45
ISM Manufacturing PMI (MAR)
51.0 49.5 Apr 01 14:00
RBC PMI Manufacturing (MAR)
49.4 Apr 01 13:30
Markit PMI Manufacturing (MAR)
51.1 50.8 Apr 01 8:30
Nikkei PMI Manufacturing (MAR)
49.1 Apr 01 2:00
51.6 Apr 01 7:30
49 Apr 01 1:00
52.7 Apr 01 1:00
48 Apr 01 1:45
Eurozone Markit PMI Manufacturing (MAR)
51.4 51.4 Apr 01 8:00
Germany Markit PMI Manufacturing (MAR)
50.4 50.4 Apr 01 7:55
Tankan Large All Industry Capex (Q1)
-0.7% 10.8% Mar 31 23:50
AIG Performance of Manufacturing (MAR)
53.5 Mar 31 23:30
Tankan Large Manufacturing Index (Q1)
8 12 Mar 31 23:50
Tankan Large Manufacturing Outlook (Q1)
6 7 Mar 31 23:50
Tankan Non - Manufacturing Index (Q1)
24 25 Mar 31 23:50
Tankan Non - Manufacturing Outlook (Q1)
21 18 Mar 31 23:50

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