RIsk Trades Stabilize, ISM Cools off

US spending and manufacturing data was soft on Thursday while inflation was higher than expected. AUD closed out the day as the top performer while CHF lagged. Japan releases inflation and employment data. Risk-on trades were picked in Thursdays Premium trades include AUDUSD longs at lower entries, EURUSD, oil & gold.

The euro initially slumped after the ISDA opted not to trigger Greek CDS but the reaction was short-lived as they pointed to the possibility of a different result if/when collective-action clauses are triggered. EUR/USD fell as low as 1.3282 but later rebounded to 1.3320, partly due to large improvements in periphery bonds.

The US January PCE report was a disappointment with spending at +0.2% vs +0.4% expected and income +0.3% vs +0.5% expected. The inflation gauge was at 2.4% y/y compared to the 2.3% consensus. The result is a soft economy with inflation.

Initial jobless claims remained low but the ISM manufacturing survey fell to 52.4 compared to 54.5 expected, raising questions about one of the strongest parts of the economy. Oil hitting $110 for the first time since May adds another potential headwind to the US economy.

Asia-Pacific Preview

Japan releases January employment data at 2330 GMT, with the jobless rate expected at 4.5%, erasing the tick higher to 4.6% in December. Household spending is expected to fall 0.9% after a 0.5% rise in December. National CPI is expected down 0.1% y/y in January while Tokyo CPI is expected down 0.2% y/y in February. A series of soft numbers could provoke speculation the MOF will do even more to weaken the yen.

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