Chinese data spooks risk further

<p>The FOMC were unmoved by the recent collapse in the EM world or the very disappointing US reports as the tapering process continued, with a […]</p>

The FOMC were unmoved by the recent collapse in the EM world or the very disappointing US reports as the tapering process continued, with a $10 billion reduction in the size of QE purchases.

The reduction in the size of QE purchases will be distributed equally between Treasuries and MBS, with both being reduced by $5 billion. Total monthly purchases now stand at $65 billion per month as of the February QE calendar. The FOMC made no changes to the forward rate guidance policy.

Turkey and South Africa both hiked rates aggressively yesterday (particularly the former) in an effort to support their ailing currencies and avert some of the risk off/EM pain.

The relief was very short lived, with both currencies ending the day lower. Bill Gross then Tweeted what most were thinking: Turkey and South Africa flunk currency test – don’t wait around to see who’s next. De-risk, move to Treasuries.

Risk trade was dealt a further blow overnight as the final Chinese HSBC manufacturing PMI for January printed at 49.5, confirming the first sub-50.0 reading in seven months. Finally the RBNZ left rates unchanged at 2.5% following their policy meeting with Governor Wheeler saying “In this environment, there is a need to return interest rates to more-normal levels. The Bank expects to start this adjustment soon.”

The data releases today consist of mortgage data from the UK along with confidence readings from Europe with the US session bringing the latest GDP estimate along with the weekly jobless claims and pending home sales data.

 

EUR/USD

Supports 1.3600-1.3570-1.3500 | Resistance 1.3725-1.3750-1.3800


USD/JPY

Supports 101.75-101.30-100.80 | Resistance 102.60-103.00-103.50

 



GBP/USD

Supports 1.6500-1.6470-1.6440 | Resistance 1.6575-1.6620-1.6670

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.