FX market outlook

FX market outlook

Australian dollar gains on upbeat China PMI data.

Currency markets were relatively quiet during the Asian session as Japan was closed for a public holiday today. Many major markets were also closed on Monday for the New year’s day holiday, which led to overall thin trading volumes.

Australian markets were the first major markets open today. The biggest mover in the session was the Australian dollar which was lifted by upbeat data out of China. Australia’s benchmark index, the S&P/ASX 200 rose 1.2 per cent.

The aussie gained more than 0.5 percent against the greenback to a session high of  $0.7234 after data showed China’s factory activity picked up in December, with output reaching a near six-year high. The Caixin/Markit PMI rose to 51.9, from 50.9 in November. China is a major trading partner for Australia and so the data helped support the aussie.

The New Zealand dollar was another big gainer versus the US dollar due to upbeat risk appetite after the China data and rose to $0.6973.

The US dollar was broadly weaker today and this helped lift the euro. The dollar index fell 0.1 per cent. The euro edged up to a session high of $1.0489 from a session low of $1.0452. Stronger-than-expected Eurozone PMI readings out on Monday also helped support the euro.

The dollar traded between 117.20 and 117.50 yen during the Asian session.

Brent crude opened higher at $57.11 a barrel from Friday’s close at $56.73. WTI oil also gained to rise to as high as $54.19 a barrel.

Gold rose from below $1150 an ounce to reach a session high of $1158.63.

Looking ahead to the rest of the day, markets will focus on German preliminary CPI figures and UK manufacturing PMI data. The US ISM manufacturing PMI will also attract attention.