Sentiment is Mixed in Asia as Investor Focus Remains on the US

An almost complete lack of headline local data and market closures in Japan and China kept some investors on the sidelines. This didn't prevent a sell-off in the euro and pound mid-way through the session, with EURUSD triggering a slew of orders around 1.3150, eventually sending the pair to a low around 1.3120. The aussie and kiwi fared better against the dollar however, although they still lost ground as traders chose to consolidate their positions.

AUDUSD holds strong, despite EUR and NZD weakness

AUDUSD has proven to be far more resilient than the kiwi and the euro. Whilst we can partly attribute the sell-off in the euro to strictly European concerns, largely due to somewhat weak manufacturing PMI data overnight, the same cannot be said for the sell-off in the kiwi. Hence, it is AUD strength that helped to keep the aussie elevated. This is partly due to positive data out of Australia's largest trading partner, China. Earlier in the week Chinese manufacturing PMI printed in expansionary territory for the third month in a row and data out of China's non-manufacturing sectors today also printed in expansionary territory. This is fueling gains for Australian miners and the aussie.

More positive data out of China

China's manufacturing PMI printed at 50.6 and non-manufacturing printed at 56.1 (prior 55.6). However, there is concern that China's property prices are starting to heat up again. The government had previously tightened policy in an attempt to cool China's property market, and since then Beijing has been loosening some of these measures in order to spur domestic demand. If China's property prices start to increase too dramatically then Beijing may have to move to cool them down, something which may be detrimental to China's short-term growth.

GBP takes a hit

In other news, the pound was hit hard today, despite manufacturing PMI data unexpectedly leaping into expansion territory. PMI printed at 51.4, significantly more than the prior revised 49.2. However, GBP has been caught up in sentiment surrounding Europe and the US which is weighing on the currency. Data out of the UK tonight and tomorrow will help to determine the short-term fate of the pair, namely construction PMI and services PMI.

Data Watch

Overall, the market will once again remain focused on the US tonight for the release of the ADP non-farm employment and unemployment figures and the FOMC's meeting minutes. We are expecting the private non-farm figure to print at 140K and initial jobless claims to be 360K, compared with the prior month's 118K and 350K respectively.

Most equity markets in Asia managed to slowly creep higher throughout the session on the back of the better than expected manufacturing data out of the US overnight and lingering optimism from China's positive manufacturing data earlier in the week.

IMOH, Patrick E.
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