Despite a slew of tier-one macro data releases price action in G10 currency markets has been reasonably subdued with the exception of a close to 1% fall in the AUD/USD cross. US data were mixed and the Dollar trade-weighted index is broadly unchanged from yesterday and in the middle of a six-week range. While US core durable goods orders, a proxy for domestic investment, rose 1.2% mom in December, the Philadelphia Fed manufacturing index slumped from 17.0 in January to -4.1 in February – the first negative print since July 2016 and a further indication that US GDP growth may have slowed further in the first half of Q1.
Data out of the Eurozone and UK were strong enough to provide some support to the Euro and Sterling but ultimately bigger issues – including the European Central Bank’s increasingly conservative tone and Brexit – are acting as headwinds to these currencies. The Eurozone composite PMI edged up to a 3-month high of 51.4 in February (with the improvement particularly notable in France) but the minutes of the ECB’s January policy meeting painted a more economic gloomy picture than previous minutes. Moreover, board members asked for swift preparations to give commercial banks more long-term loans in order to keep credit flowing in the Eurozone. The net result is that EUR/USD is still trading around 1.135 – broadly where it was a month ago.
The AUD/USD spiked higher above 0.72 in early Asian trading following the release of another strong set of labour market data, with the Australian economy creating 65,400 full-time jobs in January – the strongest print in 18 months. But the cross tanked a full big-figure to 0.71 a few hours later after customs officials at China’s northern Dalian port confirmed that they had banned imports of coal from Australia. Other major Chinese ports have prolonged clearing times for Australian coal to at least 40 days.
