Intraday Market Thoughts

The US Manufacturing Mystery, RBNZ Adds Hawkish Bias

by Adam Button
Jul 24, 2013 23:45

The Markit US manufacturing PMI rose to the highest since March, adding to the cloudy picture of US factories. The dollar rebounded after two days as the laggard while AUD was the worst performer. Early in Asia-Pacific trading New Zealand's central bank left rates at 2.50%.  

The Markit PMI is a lower-tier manufacturing indicator but it's gaining clout. It aided the US dollar rebound Wednesday with a reading of 53.2 compared to 52.5 expected. Upbeat new home sales also helped the dollar.

Overall, numbers on US manufacturing are diverging wildly. Tuesday's Richmond Fed crumbled to -11 compared to +7 in the prior months. Meanwhile the Philly Fed has repeatedly beat expectations and is at +19.8 compared to +12.5 previously. The ISM manufacturing index recently touched the lowest since 2009 and new orders tanked in the June Chicago PMI.

The survey of those numbers shows how difficult it is to understand one area of the US economy. The Fed's Beige Book points to an expansion in manufacturing but a strong dollar this year and some of these readings point to the opposite.

On Thursday, durable goods orders could help clarify the trend. In the meantime, the dollar will continue to sway with the whims of economic data.

In Asia-Pacific trading, the RBNZ left rates at 2.50% as was entirely expected. The part of the statement that caught the market off guard was a warning about housing prices and a fresh bias toward higher rates.

“Although removal of monetary stimulus will likely be needed in the future, we expect to keep the OCR unchanged through the end of the year," Governor Wheeler said in a statement.

The market is expecting a rate hike around March but it could now come sooner. NZD/USD shot to 0.7980 after the announcement from 0.7935 beforehand.

2 of our 3 longs in GBPJPY hit all targets as did 1 of our 3 GBPUSD longs. The theme of this week's Premium Insights focused on GBP Gains. USDJPY also remain on track. EURUSD trades were scaled down, shifting the focus onto EURJPY (2 of 2 hit all targets this week) and onto EURGBP. All these trades are in the Premium Insights.
Act Exp Prev GMT
Flash Manufacturing PMI
53.2 52.5 51.9 Jul 24 13:00
New Home Sales
497K 482K 459K Jul 24 14:00
New Home Sales (m/m)
8.3% 1.8% 1.3% Jul 24 14:00
Durable Goods Orders ex Transportation
0.5% 0.7% Jul 25 12:30
Durable Goods Orders (JUN)
0.5% 3.6% Jul 25 12:30

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