Markets are rather directionless as the week starts as major pairs are stuck in tight range. Yen is a touch weaker but loss is so far limited. Aussie also dipped mildly after weak Chinese data but quickly recovered. The flash Chinese PMI compiled by HSBC/Markit fell to an 8-month low of 48.1 in March from 48.5 a month ago. The market had anticipated a pickup to 48.7. the flash reading of the manufacturing output index plunged to a 18-month low of 47.3 last month. The disappointing reading indicated further moderation of China's growth momentum. According to HSBC, "weakness is broadly-based with domestic demand softening further". China is expected to "launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air cleaning and public housing, and guiding lending rates lower".
Meanwhile, investors are trying to reassess the Fed's policy outlook. St Louis Fed President Bullard indicated that Chairman Yellen's "six-month gap" comment on rate hike was no different from the Fed's previous stance. He noted that the outlook "wasn't very different from what we had heard from financial markets. So, I think she's just repeating that at that time period". Echoing Bullard's opinion, Minneapolis Fed President Kocherlokota suggested that the Fed's guidance "does not indicate any change in the Committee's policy intentions as set forth in its recent statements" whilst Dallas Fed President Fisher affirmed that "it will be quite some time" before the first rate hike. For the coming week, Atlanta Fed's Lockhart (a non-voting dove) and Philadelphia Fed's Plosser (a voting hawk), St Louis Fed's Bullard(a non-voter), Cleveland Fed's Pianalto (a centrist to modest dove), Chicago Fed's Evan (a non-voting uber-dove) and Kansas City Fed's George (non-voting hawk) are scheduled to speak this week.
Looking ahead, PMI data is the main focus today. Eurozone, Germany and French will release manufacturing and services PMI today. German PMIs are expected to drop mildly but stay strong. However, French PMIs are expected stay below 50, in particular with PMI services rose slightly to 47.5. Eurozone PMI manufacturing is expected to drop slightly to 53.1 while PMI services is expected to rise to 53.0.
As for the rest of the week, economic data are the main focus. In particular, yen's direction would be highly dependent on the inflation data to be release on Friday. Here are some highlights:
- Tuesday: Germany Ifo; UK CPI and PPI; US consumer confidence, new home sales
- Wednesday: German Gfk consumer sentiment; US durable goods orders
- Thursday: New Zealand trade balance; UK retail sales; US jobless claims, GDP final, pending home sales
- Friday: Japan CPI, retail sales; German CPI; UK GDP final; US personal spending and income