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Risk currencies look ahead to China PMI

The AUD remains fragile in Asia after private sector credit data came in slightly below expectations.

AUD/USD had managed to recover significantly from yesterday’s woes on the back of disappointing private capital expenditure numbers. Traders might now be looking to sell the pair on strength after the sharp recovery.

The headline private sector credit reading showed a 0.4% rise month-on-month while the market expected a 0.5% rise. On year, the reading was in-line with consensus at +4.1%. The rise was largely driven by home loans, probably as a result of lower interest rates.

Credit to consumers for purchases other than housing was benign, with just a 0.1% rise in January and 1% for the year. Lending to companies was also benign but showed signs of improvement.

AUD/USD is holding its ground at 0.897, with investors looking ahead to next week’s RBA meeting and tomorrow’s China manufacturing PMI reading.

China PMI reading which is expected to come in at 50.2 and we might see some positioning ahead of it. After the recent disappointment in the HSBC print, a drop into contractionary territory could be devastating for riskon Monday. As the pair approaches the 0.90 mark again, it’ll be interesting to see if traders who went long off the 0.89 support can hold their nerve.

Japan data impresses

USD/JPY has slipped in Asia as the yen gains some ground after a string of better-than-expected economic readings.

Household spending, CPI, retail sales and industrial production all came in ahead of expectations. The pair is now below 102, where it has found some buying support over the past few weeks. With Japan data mostly out of the way, focus shifts to the greenback.

Out of the US we have GDP, Chicago PMI, consumer sentiment, inflation expectations and pending home sales. We also have quite a number of Fed members speaking later today including Stein, Kocherlakota, Plosser and Evans.

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