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

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

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)

Low