- Equity markets cheer China PMI during the Asian session.
- European data might trigger more haven demand.
- EUR/USD is just shy of breaking a critical moving average support.
- EUR/JPY might break below 122.00.
Chinese Caixin Manufacturing PMI hit its highest level since January 2011, recording gains for six months continuously. The numbers helped the Asia-Pacific shares to post gains today; Japan’s Nikkei 225 index went up by 1.4 Percent, and Australia’s ASX 200 index was up by 0.4 Percent.
The PMI numbers showed manufacturing improving better than expected while job advertisements and building permits also went above market expectations.
The haven-linked Japanese yen and the US dollar received buying interest at the expense of pro-risk currencies like Australian, Canadian and New Zealand dollars ahead of the US presidential elections tomorrow.
The economic docket is heavy today with many PMI releases from the US and Europe.
Europe’s recovery hopes have hit a setback in recent days with the surge in the number of pandemic cases; governments in the region have been forced to impose fresh lockdowns.
France and Germany have announced lockdowns which will last a month at least, while Italy has severely restricted the public movement compared to the previous months.
ECB didn’t provide any fresh ammunition in its October 29 meeting but hinted that it would “recalibrate its instruments” in December after assessing the economic situation.
The €1.35 trillion Pandemic Emergency Purchase Program might also be expanded next month even though only less than half of the current envelope has been spent till date. Also, some members consider the current upper limit as a ceiling and not as a target.
But, President Christine Lagarde has indicated a preference for expanding PEPP to fight the coronavirus induced economic setback.
So, suppose today’s EU PMI and retail sales numbers fall below expectations. In that case, the case for additional monetary stimulus will receive more support and might weaken the Euro against haven-linked currencies like the dollar and yen.