European Summary and Highlights 2 Jan
The USD was generally firmer through the European morning, rising across the board.
European morning session
The USD was generally firmer through the European morning, rising across the board. After a quiet start, the USD rose following the Eurozone data, which showed a marginal upward revision to manufacturing PMIs, while money data showed a slightly smaller than expected y/y decline in M3, which was down 0.9% y/y, but further weakness in loans to both households and businesses, which showed annual growth hit another post-2015 low.
GBP showed the most significant decline, falling against the EUR as well as the USD, helped by the small downward revision in the UK manufacturing PMI, although the pound was already softer ahead of the data. EUR/USD dropped around 30 pips to near 1.10, while USD/JPY gained around 20 pips to 141.60. GBP/USD lost 60 pips to 1.2690. Riskier currencies were generally pressured by a slightly softer tone to equities.
Asia session
USD is trading broadly higher against most major peers on the first official trading day of the year. There seems to be haven bids on the greenback as Houthi leadership openly suggest military operation against the U.S. over the weekend. In the past months, U.S. have constrained their military action in the Middle East to avoid further escalation of geopolitical conflict, the latest development may see a change of that and granted some haven bids for the USD. There is no headlines from the Japan side apart from earthquake over the weekend, which the market has quickly shaken off the impact, and we will not be expecting any cues unless wage and inflation metrics surprise strongly to the upside. For USD/JPY, it would be directed by yields and flow for now. USD/JPY is trading 0.32% higher at 141.44.
The Chinese Caixin (Private) Manufacturing Monthly PMI showed a beat of estimate at 50.8, better than the official PMI released over the weekend that shows a further contraction. The Aussie is supported by higher commodity price on heightened geopolitical tension and "better" Chinese data, including domestic demand in traveling throughout the new year. AUD/USD is trading 0.23% higher at 0.6827 as the sole winner within major peers against the USD, NZD/USD dipped by 0.26% to 0.6310 while USD/CAD also rose by 0.06% to 1.3251. Elsewhere, EUR/USD is trading 0.07% lower and GBP/USD 0.02% lower.