Wednesday, April 1, 2015

USD lower as economic indicators disappoint

•       USD lower as economic indicators disappoint
–      Weak Chicago Fed PMI, rise in “jobs hard to get” index disappoint; yields down 2 bps
–      Nonetheless Fed funds expectations rise on hawkish comments by Lacker, George
–      USD weaker vs most G10, EM currencies – change in economic expectations or just no more end-quarter buying to do? We’ll see today.

•       China official manufacturing PMI back above 50 (barely)
–      Index rises to 50.1 from 49.9 (expected to fall); AUD gains marginally, but loses most of the gains as iron ore prices continue to fall
–      More important:  China insures bank deposits, a step towards liberalizing interest rates. That’s good long term but in short term means more bankruptcies = AUD-negative

•       Q1 Tankan is very disappointing
–      No improvement for large manufacturers, decline expected in Q2; capital spending plans revised down = no signs of recovery even a year after hike in consumption tax
–      Stocks & USD/JPY fall, but it’s JPY-neg long term as Abe will want to boost exports

•       Today:
–      Eurozone: manufacturing PMI from several European countries
–      UK:  Manufacturing PMI
–      US: ADP report expected to show increase from last month = USD-positive

–      Speakers:  Fed’s Lockhart & Williams

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