Favourable Chinese PMI data kick started the Asian stock market this morning.

The country’s manufacturing Purchasing Managers Index reading in January was 51.3, higher than the market consensus of 51.2. This marks six consecutive months of expansion in the country’s manufacturing sector and shows further stabilisation of Asia’s largest economy.

As concerns rose over potential trade tensions between Beijing and Washington under Trump’s administration, a robust PMI reading will allow China’s policy makers to shift towards a neutral policy stance.

The US Dollar index slumped over 0.9% last night to the 99.60 area- its lowest level in more than three months. A weaker dollar sent gold, silver and crude oil prices higher. Silver prices soared to $17.52 per ounce, a price not seen since 11th Nov.  USD/JPY slumped to two-month lows of 122.9, with the immediate support level at around 112.3 (50% Fibonacci Retracement level).

Key risks ahead include rising political tensions between US and Mexico, and uncertainties on immigration and free trade amid Trump’s protectionism.

Tonight, the FOMC’s interest rate decision may heighten volatility in the FX market, but the chance of a rate hike this time is relatively small – around 14% according to Bloomberg’s world interest rate probability forecast. Investors will monitor the Fed’s tone towards the economic outlook, new presidency and future rate hikes.

USD/JPY

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