23 Apr 2014
Europena wrap and a look at China flows - BMO Capital Markets
FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital gives us a wrap of european markets and then takes us across to China.
Key Quotes:
"The hallmarks of the morning session in London were a weak AUD, a firmer EUR and a firmer JPY. There seemed to be underlying demand for the GBP from around the lows, but the size of the net leveraged long position in the currency probably means that the BoE minutes had to be a lot more ‘hawkish’ than they were in order to spur further gains. During the Asian session, more downside in CNH materialised, and the currency traded like the market was looking for a better Chinese PMI."
"USD/CNY has continued to settle further above the mid-point fix in percentage terms, with the latest weakening move in CNY/CNH being driven by a tepid Manufacturing PMI from China overnight. There did appear to be some ‘panic’ buying of USD/CNH following the release of the PMI overnight ahead of 6.240, and we would suggest two possible causes."
"First, the market may have been caught off guard by the lower fix ahead of the tepid data (down 11 pips to 6.1599). The lower fix ahead of data which may have been expected to be better than it was fits with PBoC’s recent bias: to ‘scare’ the market into higher volatility."
"Second, the very fact that some may have been positioned for a better figure supports the argument that PBoC has succeeded in creating more two-way flow. Being long of a currency heading into a data release and then being caught off guard by a poor print has a decidedly ‘G10 feel’ to it."
Key Quotes:
"The hallmarks of the morning session in London were a weak AUD, a firmer EUR and a firmer JPY. There seemed to be underlying demand for the GBP from around the lows, but the size of the net leveraged long position in the currency probably means that the BoE minutes had to be a lot more ‘hawkish’ than they were in order to spur further gains. During the Asian session, more downside in CNH materialised, and the currency traded like the market was looking for a better Chinese PMI."
"USD/CNY has continued to settle further above the mid-point fix in percentage terms, with the latest weakening move in CNY/CNH being driven by a tepid Manufacturing PMI from China overnight. There did appear to be some ‘panic’ buying of USD/CNH following the release of the PMI overnight ahead of 6.240, and we would suggest two possible causes."
"First, the market may have been caught off guard by the lower fix ahead of the tepid data (down 11 pips to 6.1599). The lower fix ahead of data which may have been expected to be better than it was fits with PBoC’s recent bias: to ‘scare’ the market into higher volatility."
"Second, the very fact that some may have been positioned for a better figure supports the argument that PBoC has succeeded in creating more two-way flow. Being long of a currency heading into a data release and then being caught off guard by a poor print has a decidedly ‘G10 feel’ to it."