Dollar, Yen to Extend Gains on Disappointing Eurozone PMI Data

DailyFX

The US Dollar and Japanese Yen are likely to extend gains if a disappointing set of Eurozone PMI figures stokes continued risk aversion.

Talking Points

  • US Dollar, Yen Rise as Soft Chinese PMI Data Fuels Risk Aversion
  • Sentiment May Continued to Deteriorate on Eurozone PMI Figures

The US Dollar and Japanese Yen outperformed in overnight trade after a disappointing Chinese Manufacturing PMI reading rekindled global slowdown fears and sparked risk aversion, boosting demand for the go-to safe haven currencies. The sentiment-sensitive Australian and New Zealand Dollars underperformed, with each currency sliding as much as 0.4 percent on average against their leading counterparts.

Looking ahead, the spotlight in European trading hours is on the preliminary set of April’s Eurozone PMI figures. Expectations suggest the region-wide composite index will show the pace of contraction in manufacturing- and service-sector activity remained unchanged from the prior month. Euro area news-flow has increasingly underperformed relative to consensus forecasts since over the past two months however. This hints economists continue to underestimate the severity of recession in the region, opening the door for a downside surprise.

A disappointing set of PMI figures is likely to reinforce growth concerns, fueling broad-based risk aversion and compounding pressure on cycle-sensitive currencies while offering continued support to the greenback and the Yen. S&P 500 index futures are pointing lower in late Asian hours, bolstering the case for a risk-averse scenario. The March set of US New Home Sales data as well as the Richmond Fed Manufacturing Survey come into focus in the afternoon.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

0:00

AUD

Conference Board Leading Index (FEB)

0.3%

-

0.1%

1:45

CNY

HSBC Flash Manufacturing PMI (APR)

50.5

51.5

51.6

5:00

JPY

Small Business Confidence (APR)

49.4

-

49.7

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

CHF

Trade Balance (CHF) (MAR)

1.90B (A)

2.00B

Medium

6:00

CHF

Exports (MoM) (MAR)

5.1% (A)

-0.7%

Low

6:00

CHF

Imports (MoM) (MAR)

2.0% (A)

-5.0%

Low

6:45

EUR

French Business Confidence Indicator (APR)

89

80

Low

7:00

EUR

French PMI Manufacturing (APR P)

44.1

44.0

Medium

7:00

EUR

French PMI Services (APR P)

42.0

41.3

Medium

7:30

EUR

German PMI Manufacturing (APR A)

49.0

49.0

High

7:30

EUR

German PMI Services (APR A)

51.0

50.9

High

8:00

EUR

Euro-Zone PMI Manufacturing (APR A)

46.7

46.8

High

8:00

EUR

Euro-Zone PMI Services (APR A)

46.5

46.4

High

8:00

EUR

Euro-Zone PMI Composite (APR A)

46.5

46.5

High

8:00

EUR

Italian Consumer Confidence Index (APR)

85.0

85.2

Low

8:30

GBP

Public Finances (PSNCR) (£) (MAR)

18.0B

-1.5B

Medium

8:30

GBP

PSNB ex Interventions (MAR)

15.5B

2.8B

Low

8:30

GBP

Public Sector Net Borrowing (£) (MAR)

13.8B

4.4B

Low

10:00

GBP

CBI Trends Total Orders (APR)

-13

-15

Low

10:00

GBP

CBI Trends Selling Prices (APR)

5

5

Low

10:00

GBP

CBI Business Optimism (APR)

2

0

Medium

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.0000

1.0000

GBPUSD

1.0000

1.0000

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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