Chinese data spooks risk further

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