Chinese Data Kneecaps Risk but Euro Shines

Market Drivers April 30, 2019
Weak CNY readings send USDJPY to 3-week lows
German CPI runs hotter
Nikkei -0.22% Dax -0.23%
Oil $63/bbl
Gold $1283/oz.

Europe and Asia:
CNY Manufacturing PMI 50.1 vs. 50.7
EUR Saxony CPI 1.7% vs 1.1%

North America:
CAD GDP 8:30
USD Chicago PMI 9:45
USD Consumer Confidence 10:00

Weak Chinese data sent risk FX lower in Asian and early European trade sending USDJPY to 3 week lows as traders feared that a global growth rebound may be in danger of sputtering.

Chinese PMI Manufacturing reading came in weaker than forecast, barely managing to stay above the 50 boom/bust line at 50.1. Most of the categories were lower than the month prior, but new export orders rose to 49.7 from 47.1 providing a small ray of hope for the bulls. Still, the Chinese data was a disappointment to the market after so much stimulus from Chinese policymakers and suggests that the Q2 recovery remains fragile. The move pressured US 10 year rates lower, but they managed to recover and traded at 2.53% by mid-morning London dealing.

The dour Chinese news was offset in European session by news that German CPI data recovered markedly. The various German state CPI readings rose by 0.5% or more offering relief that deflationary forces may have abated. EZ flash GDP reading also came in better than expected at 0.4% vs. 0.3% providing fuel to the short covering rally that took the pair through the 1.1200 figure. The pop has taken shorts by surprise and if the US corps presses the long side into North American trade the pair – which has been severely oversold over the past few sessions – could rally all the way to 1.1250 as further short covering kicks in.

In North America today, there is only third tier data out of US, but also a GDP reading out of Canada that could boost the loonie if the number beats consensus. Although BoC has been squarely in the neutral camp for a while now, the latest GDP and CPI reading suggest that both growth and inflation may be starting to pick up and change of stance may be needed sooner rather than later. That, in turn, could create more downside action for USDCAD with shorts eyeing the 1.3400 figure on any beat in the data.