Aussie Dollar in Limbo on Soft Manufacturing Print
THE TAKEAWAY: Australian and Chinese manufacturing industry contracts > European recession still appears to weigh on Asian economies > Australian Dollar little changed
Monday’s trading session has been quiet across the currency markets with the greenback nudging slightly higher versus the Australian dollar by 0.4 percent. The Australian manufacturing sector contracted for a sixth consecutive month as the AiG Manufacturing Index reported a print for September at 44.1 which was down from 45.3 in August. Meanwhile the Chinese manufacturing sector contracted slightly in September as the Chinese Manufacturing PMI data came across the wires at 49.8 which was a few ticks higher from last month’s reading at 49.2. A reading below 50 indicates contraction for both Australian and Chinese production industries.
Prices for Chinese exports of hot rolled coil, a steel product used for building infrastructure, to the Eurozone declined by roughly 25 percent over the last twelve months providing further evidence the recession in Europe is taking its toll on Chinese and Australian production.
Later in the European session the final September manufacturing figures are scheduled for release for French, Italian and German industry.
On October 2, the Reserve Bank of Australia will announce their monthly rate decision while markets appear to be pricing in a strong probability of a 25 basis point cut to the overnight borrowing rate according to Credit Suisse data. The high-yielding Aussie currency is sensitive to rate changes and an adjustment to RBA policy could help stoke market volatility.
AUD/USD, Daily Chart