Without any sugar-coating it the Chinese economy continues to show signs of recessionary pressure. The HSBC Flash Manufacturing PMI was released earlier this morning and while it came in above expectations with a reading of 49.7, it is still under the important parameter of 50. Also the previous month’s reading was actually revised downward to 48.1 from 48.3. Thus, it remains clear that Asia’s giant engine and a large component of the global picture remains cloudy. On this news the JPY has traded stronger versus the USD, but has not broken its rather consolidated range of the past week. This as Japanese investors show their legendary trait of taking risk off the table on fundamental news.
French PMI data has already been published this morning and came in below expectations and also continues to show that France is struggling. German data will be released in about five minutes time. The EUR has broken resistance and while it finds itself near the higher value of a long-term range, the Single Currency has continued to show weakness since the ECB monetary policy meeting held earlier in May.
(The German Flash Manufacturing PMI has just come in with a negative 52.9 mark compared to the expected reading of 54.0).
Gold has also remained under pressure and as of this writing is near 1294.00 USD. Gold has been in a long time slump. The bear market that has shadowed the precious metal remains an important aspect of the commodity market showing that inflation concerns globally remain dampened. Which also unfortunately means that economic growth has been lacklustre as do the outlooks of many analysts including Digital Markets Advisor.
Bourses traded higher on Wednesday showing a taste for continued risk taking among equities. Wall Street including the Dow Jones Industrials, the S&P 500, and NASDAQ have all shown that investors are finding stocks a good speculative battlefield to seek profits. Short-term the trend cannot be argued among the bourses including Asia and Europe, the question is how long can the bull run continue?
Importantly for the FX market the U.K.’s Second Estimate GDP will be brought forth a bit later this morning. And then the U.S. will get into the act with weekly Unemployment Claims, Existing House Sales, and a Flash Manufacturing PMI report. Late tonight more Chinese data will come via the CB Leading Index and this will be followed by tomorrow’s German Ifo Business Climate.
Going into the weekend today’s data and tomorrow’s could have an impact on the markets because traders may not want to leave positions open going into a long holiday weekend for many. Data has not been good this week from any of the major economic spheres Asia, Europe, or North America. Not only has PMI data proved poor but other cracks in the armour remain clear including an unstable housing market in the States.
Because of this the FX markets while having traded in a rather cautious mode the past week, may be ready to see some critical tests. Can the USD continue to get stronger versus the EUR? Will Gold continue to slump? And can the equity markets keep up their rather speedy pace upwards? Short-term it appears the USD may trade with more value particularly if global data remains disappointing. Gold could certainly trade lower too. Wall Street and its cousins are a concern and while the trend would be foolhardy to not be given attention its heights may be too high.