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Forex Flash: Weak Chinese flash PMI suggests growth may trend down in Q2 - Nomura

FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the HSBC flash manufacturing PMI dropped to 50.5 in April from 51.6 in March (Consensus: 51.5; Nomura: 52.0), despite positive seasonal factors which usually drives April readings of the PMI up.

He comments that in the past seven years, the PMI in April has risen five times, fallen once and been flat once. On average it rose by 1.2 percentage points (pp) from March to April. Excluding 2009 (an abnormal year when the RMB 4trn fiscal stimulus pushed it up quickly), he notes that it rose by 0.5pp. Both the new orders and new export orders components declined, while finished goods inventory rose. Zhang sees that the fall in the HSBC flash PMI is inconsistent with the recent rise in the MNI China flash business sentiment index (to 59.3 in April from 58.2 in March) and both indicators are highly correlated with the official PMI.

Zhang finishes by commenting, “We maintain our view that GDP growth peaked in Q1 at 7.7% and will trend down through the rest of the year, to 7.5% in Q2, 7.4% in Q3 and 7.2% in Q4 (Consensus expects growth to rebound in Q2 to 8%), as potential growth has slowed to 7.0-7.5% and as the effectiveness of policy easing has been diminished by aggressive stimulus measures taken over the past five years.”

Forex Flash: ECB rate cuts on the horizon? – UBS

In addition to the recent PMI figures, Germany's IFO data is also released this week. According to the UBS Research Team, “This is a survey that is likely to carry weight with policymakers and as a result the case for another ECB rate cut seems to be building. If the central bank does decide to ease in the next couple of months, it will likely cut its benchmark refinance lending rate from 0.75% to 0.50% - that would help push the euro down into a 1.28-1.30 range against the dollar.”
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Forex Flash: GBP/USD focus is on 1.5190 support – Commerzbank

Commerzbank analysts see market’s focus still on the channel support, currently at 1.5190, and 1.5412/20 (recent high and the 38.2% retracement) as an interim high. “Loss of the 1.5190 uptrend is needed to add weight to the idea that the market has resumed its down move. Below here will trigger losses to the 1.5028 (the 20th March low). We also find the 61.8% retracement here at 1.5052 and we may see this hold the initial test”, wrote analyst Karen Jones, pointing to another leg lower to the 1.4832 March low in case of another break. “Longer term we target 1.4229, the 2010 low”, she added.
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