Ten Things You Need To Know

The US dollar is mixed as the market continues to search for a new range post-FOMC. The relentless rise of the dollar has been broken with the help of a softer US rate environment. The seemingly relentless push of the euro toward parity has been stopped in it tracks. The long overdue technical correction in the dollar may have more room to run.  

There are ten things that you should know today.  

1.  The HSBC flash China manufacturing PMI was disappointing and confirms the risk of a soft Q1 growth. The 49.2 reading in March (down from 50.7 in February) is an 11-month low. The consensus expected a reading above the 50 boom/bust level. New orders improved to 49.3 from 47.1 but remain in contraction mode. Export orders also eased. 

2.  Japan’s March flash manufacturing PMI also disappointed, falling to 50.4 from 51.6 in February. The consensus had forecast improvement to 52.1.  New orders fell to 49.5 from 51.0 and export orders slipped to 52.2 from 53.7. Recall that the BOJ had upgraded its assessment of exports and industrial output recently. The aggressive monetary policy does not appear to be putting a solid floor under economic activity, and at the end of this week, it will be confirmed that deflationary forces have also not been defeated. A recent Bloomberg poll found 2/3 of the 34 economists surveyed expect the BOJ to increase asset purchases at some point this year, with more than half expected an increase ETF and REIT purchases. Initial support for the dollar is seen near JPY119.30 and a break could spur a move toward JPY118.80. 

3.  The general improving tone in the euro area continued before the ECB launched its more aggressive asset purchase program. The composite March reading was at a new cyclical higher of 54.1. After a soft patch last year, the German economy has accelerated. The manufacturing PMI (flash) rose to 52.4 from 51.1. The consensus was for 51.5.  Services rose to 55.3 from 54.7. This was also a bit better than expected. France showed a mixed picture. The manufacturing PMI rose to 48.2 from 47.6but was slightly lower than expected. The service sector slipped to 51.7 from 52.2. In general, the decline in interest rates, oil, and the euro should see the regional economy gain better traction. The euro has tested the $1.10 level. The post-FOMC high was set near $1.1045.  Look for a break of this to signal the next leg up in what we continue to regard as corrective gains. Initial support is seen ahead of the 20-day moving average which comes in near $1.0885 now.