Risk currencies are tracking the latest boost in equity markets as traders begin re-entering the market following the New Year’s holiday. Part in the optimism is resulting from the positive Chinese PMI manufacturing information, which still were able to show expansion (albeit barely) which triggered some selling within the secure haven assets. Positive Chinese information is generally a positive for Australian markets (as this really is where most of their exports can be bought), and so the information helped push the AUD/USD back above 1.0300, exactly where it is nonetheless possessing its gains. Comparable moves had been seen in the NZD/USD as markets start searching for greater yields.
Not all the news was positive, however, as comparable reports out of the Eurozone had been not quite as encouraging. The December PMI manufacturing released yesterday started in at 46.9 (which is in contractionary territory). To reverse this, Eurozone member nations will have to successfully implement their proposed austerity plans, and this really is exactly where the majority of the attention will be centered in 2012. Shorter term, we’ll not see bond auctions in Spain and Italy until subsequent week, which means you occasion danger is still some ways off.
The subsequent important occasion risk will happen with the ISM manufacturing data out in the US today, which is likely to deviate in the results in the Eurozone and show expansion at 53.four. An additional factor to keep in mind is the fact that it is an election year within the US and actual voting begins today in the Iowa caucuses. The US economy is most likely to become the central concentrate within the election and this may be given some additional attention these days as the meeting minutes on the last FOMC policy meeting, so this will give to us an indication of some of the issues that could be discussed in the election.
In Switzerland, we’ll see the launch of December CPI, and then for any weakness in such a details will most most likely result in discussions about the price floor that the Swiss National Bank invest location within the EUR/CHF. Signs of deflation will lead some analysts to forecast a rise with this cost floor (from 1.20) as being a means for stimulating the country’s export markets. Markets expect the CPI to drop -0.6 percent, so any main deviations could bring some volatility into foreign exchange. We will have PMI data on the Swiss, as well as Norway and also the UK.
The EUR/CHF continues to be displaying some uncharacteristic weakness lately, with prices falling to new hourly lows at 1.2135. We’re viewing this as a very favorable entry region, since the bad thing is not likely to boost beyond 1.20. Stops may be placed below this level, targeting an increase to at least 1.25. This trade also has carry value, so holding it long term also has its benefits.
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