FXPRIMUS : Risk Currencies Hold Well On Upbeat Chinese Data

Economic Insights

HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) rises to 50.9, in line with my forecast

China’s manufacturing sector picked up in December at a faster growth rate, with rises in areas such as new orders and employment, underlining a brighter outlook for the economy in coming months. My forecast is exactly the same as the actual releases.Source: BloombergClick the image to enlarge

HSBC Flash China Manufacturing PMI for December rose to 50.9, a 14-month high and the fifth straight monthly gain. However, the New Orders Index dropped below 50 again, indicating that the export outlook remains bleak.

New Export Orders fell in November, which means export growth is still weak and external risks still exist. Thus, I expect the Chinese government should maintain a moderately loose policy stance to hedge the risk of weakening external demand.

This confirms that economic recovery continues gaining momentum in the meantime, though many risks still exist. This calls for a continuation of policy easing to strengthen the recovery.

Single currency bolstered by European Union (EU) Summit

European leaders held the sixth EU Summit this year. After eight hours of overnight talks, leaders attending the summit agreed to continue taking firm action to support the European financial system. They also reiterated the resolve of the European debt crisis.

Euro Zone finance ministers agreed earlier, ahead of the EU Summit, that the Euro area banking sector would be under the direct supervision of the European Central Bank (ECB), and approved a new round of relief loans paying EUR49.1 billion to Greece.

In an EU Summit statement, European leaders reached a consensus to move towards the establishment of a mechanism to continue its efforts of gradually reducing the banking crisis. However, this project is still unknown.

European Council President Herman Van Rompuy said that leaders decided to develop a mechanism to directly inject capital into banks, by framework of the European Stability Mechanism (ESM) and to be established in the first half of 2013.Source: BloombergClick the image to enlarge


Currency Insights

GBPNZD – watch coming resistance at 1.9150

I mentioned the bearish momentum for this pair a few times since beginning of the month. The Reserve Bank of New Zealand (RBNZ) is expected to release its monetary policy and will probably keep the policy rate unchanged again in its next meeting.

Against the GBP, the pair’s next resistance level is at 1.9150. The next support level is at 1.90000.Click the image to enlarge

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