Aussie Lower On Disappointing China Manufacturing Data

Asian equities are broadly lower today, after disappointing manufacturing data from China also pressurized the Aussie. The preliminary HSBC manufacturing PMI dropped to 50.5 in April, down from the final reading of 51.6 in March, which also missed expectation of 51.4. The data suggested that manufacturing activities in China continue to slow. This added to the concern of overall pace of recovery China following the weaker than expected Q1 GDP released earlier this month. The AUD/USD extends the fall from 1.0581, and reaches as high as 1.0220 so far at the time of writing. The EUR/AUD took out last week's high of 1.2738 to resume recent rebound from 1.2218.

Yen recovers mildly on risk aversion, as the USD/JPY failed to take out 100 psychological level and retreated from there. As noted, yen crosses are still bounded in recent range, and we're favoring the consolidations that are still in progress. Yen crosses have possibly just started another falling leg, and might revisit last week's low. That is 95.78 in USD/JPY, 124.84 in EUR/JPY and 146.42 in GBP/JPY. We'd expect strong support from there to contain downside and bring up trend resumption eventually. Meanwhile, the BoJ could raise it's inflation forecast this week and project that a 2% target within two years. This would be an indication whether the BoJ thinks its current program is enough to boost inflation.

PMI data will be a major focus in the eurozone today. Eurozone PMI manufacturing is expected to be steady at 46.8, while the services PMI is expected to improve slightly to 46.7 in April. Attention will also be on Germany's economy - whether it could sustain momentum to lead the eurozone out of recession. The German PMI manufacturing report is expected to be unchanged at 49, while PMI services is expected to rise to 5.1.1. French PMI manufacturing and services are expected to improve to 44.2 and 42.3 respectively. DisappointingGerman and French data would pressure the Euro.

Other data to be watched today include Swiss trade balance, UK public sector net borrowing, Canadian retail sales, US house price index and new home sales.