The US dollar index rallied 0.76 percent in yesterday’s session as weak Chinese manufacturing PMI for December came in at a lower number than expected (49.7 versus 50.1). The manufacturing PMI in China is a leading indicator of economic health and reacts quickly to market conditions. The FX market was already suspicious of China, but Tim Cook, Apple CEO, came right out and said that a sharp macroeconomic slowdown in China was almost entirely responsible for a drop in revenue guidance. Will the US-China trade war topic escalate again soon?
On the economic release side, unemployment claims came in at 231 k when the expected was 220 k. However, the ADP non-farm employment change came in at 271 k versus 179 k. At the time of this writing, the US dollar is under pressure, falling 0.14 percent. Furthermore, market participants are cautious as they await headlines on the new Congress which is expected to be sworn into power today in the US.
The big move happened with the Japanese Yen; the Yen was already near extreme highs with many of its crosses, and the USD/JPY pair touched the lowest level since March 2018. A more unusual move was the AUD/JPY, which crumbled to the weakest level since 2010. This situation was especially unique, because it was a bank holiday in Japan all week, and yesterday many FX pairs had insane moves and showed wide spreads, even in FX majors.