China Manufacturing Recovery Boosts EUR

The HSBC Flash Purchasing Manager’s Index showed a reading of 50.4 which signals an expansion. It is the first time it has been above 50 in 13 months. While not a strong reading in itself, the fact that technically the Chinese economy is not slowing down is seen as a positive. The EUR/USD jumped to a w week high boosted by the news. Today is the Thanksgiving holiday in the US with lower liquidity. Monday when all the market participants are back will show the true impact of the HSBC survey results.

Forex heatmap

The Eurozone PMI was also reported today and while China may have turned a corner, the EU continues to struggle with dropping output. With the US market closed the EUR was seen as the safer haven, even though its own manufacturing is contracting. The Markit eurozone Purchasing Managers Output Index had a reading well below 50 at 45.8. The survey also showed forecasted drop of 0.5 percent of GDP in the fourth quarter.

Figures in the UK did not bring positive news for the GBP as the currency dropped after the announcement that British manufacturing remains near the lowest readings in 10 months. The pound continues to suffer from UK economic fundamentals and its also guilty by association with the euro zone crisis. The Confederation of British Industry published a survey that shows UK manufacturers forecast a fall in output in the next three months.

OANDA Open Positions Ratio is a 20 minute snapshot of client open positions. EUR/USD continues to hold the highest ratio with close to 30% of open positions. Market sentiment has been split almost 50/50 on EUR/USD but of late there has been more of a short bias as EUR longs have retreated. Metals continue their long bias as more positions are opened versus the USD.

EUR pairs continued their advance across the board. The US holiday bring low liquidity which can have a higher volatility impact when news such as the Chinese manufacturing recovery. The Yen pairs continue to retreat and its no surprise to see the EUR/JPY at the top of the movers list as it combines the two currencies. Swiss pairs got a boost from their USD and GBP crosses as it appreciated against them both around 0.375 percent.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza