TALKING POINTS – CHINA PMI DATA, AUSTRALIAN DOLLAR:
- China’s manufacturing PMI came in above expectations, just
- The service sector did better, leading to a modest composite beat
- Australian Dollar markets are probably focused closer to home this week with an RBA policy meeting coming up on Tuesday
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The Australian Dollar remains under broad pressure and got only a modest lift Monday from news of expansion in Chinese economic activity.
China’s official manufacturing Purchasing Managers index for April came in at 51.4, below the 51.5 seen in March but a whisker above expectations. In the logic of PMIs, any reading above 50 signifies expansion for the sector in question and the trend of measurable- if hardly stellar- growth for China’s big manufacturers continues.
The non-manufacturing PMI was 54.8 for a composite figure of 54.1, comfortably above the March figure of 54.0. China’s economy seems to be conforming to the more modest growth target of 6.5% set for it by Beijing this year, with worries only likely to grow if the year’s early quarters come to be seen as the high water mark for world growth.
The Australian Dollar can act as the foreign exchange markets’ liquid China proxy, but did not do so to any huge extent Monday with only a modest pickup seen.
On its broader, daily chart, AUD/USD remains under clear pressure. The US Federal Reserve, apparently still committed to raising interest rates, contrasts sharply with a Reserve Bank of Australia clearly in no hurry to lift its own record-low ones. Rate futures markets don’t suggest any pickup for Australian interest rates until June 2019, and the sense that the RBA is happy enough with this prognosis suggests that AUD/USD may well have further to fall.,
For now, it seems to be attempting a base just above the lows of last December. However, another RBA policy meeting underlining market suspicions could see it headed lower once more. The Austrralian central bank will announce its May interest rate call on Tuesday.
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— Written by David Cottle, DailyFX Research
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