Headlines:
- Cable extends gains as UK PMI reaffirms economic resilience
- Lower yields add to the drag in the dollar so far today
- PBOC to cut reserve requirement ratio from 5 February
- France January flash services PMI 45.0 vs 46.0 expected
- Germany January flash manufacturing PMI 45.4 vs 43.7 expected
- Eurozone January flash services PMI 48.4 vs 49.0 expected
- UK January flash services PMI 53.8 vs 53.2 expected
- UK January CBI trends total orders -30 vs -23 expected
- US MBA mortgage applications w.e. 19 January +3.7% vs +10.4% prior
- German economy to take a further knock on China struggles - Bundesbank
- Ifo slashes Germany 2024 growth forecast to 0.7% from 0.9% previously
Markets:
- JPY leads, USD lags on the day
- European equities higher; S&P 500 futures up 0.4%
- US 10-year yields down 3.7 bps to 4.105%
- Gold up 0.2% to $2,033.14
- WTI crude down 0.4% to $74.05
- Bitcoin up 2.5% to $40,154
It was an active session in Europe today with the dollar slipping across the board, not helped by a drag lower in bond yields and better risk appetite. The latter was helped by news from China as the PBOC announced a hefty 50 bps reduction in the RRR starting from 5 February. That's not quite the $268 billion stock market backstop that was promised but it is still something at least.
As a reminder, the Chinese central bank only reduced the RRR twice last year - once in March and the other in September - with 25 bps reductions each in those months.
In any case, the dollar saw early losses translate into some heavier selling with USD/JPY in particular falling from 148.00 to 147.25 and hanging at the lows currently. Meanwhile, EUR/USD extended higher from 1.0860 to 1.0907 and is holding just under that with large option expiries marked at 1.0900 for today.
A more buoyant UK PMI data was helpful to see GBP/USD rise from 1.2700 to 1.2770 before paring some of that advance to 1.2730-40 levels now. At the balance, EUR/GBP is kept little changed at around 0.8550-55 for the most part on the session.
The antipodean currencies are also enjoying modest gains with AUD/USD up 0.2% to 0.6595 while NZD/USD is up 0.4% to 0.6125 on the day. As for USD/CAD, it is trading little changed at 1.3455 with the BOC coming up later on in the day.
In other markets, US futures are staying underpinned as tech shares are leading the charge once again. Netflix topping revenue estimates and seeing a jump in subscribers in Q4 is helping with the mood on the day. At the same time, we're seeing a rebound back in Bitcoin as well to just above the $40,000 mark for now.
