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CNH Tumbles Following Manufacturing PMI Release

CNH Tumbles Following Manufacturing PMI Release

Michael Romero, Contributor

Talking Points:

• Yuan Falls Following Dismal Manufacturing PMI Announcement.

• PBOC Cuts Guidance Rate on Seven-Day Repo Agreement.

The Yuan depreciated as the HSBC China manufacturing purchasing manager’s index (PMI) fell to 49.2 in March 2015, well below leading economists’ expectations of 50.5 and February 2015’s figure of 50.7. The 11-month low, only furthered indicated that China’s economy is gradually showing signs of slowing down. Weak domestic demand contributed to a decrease in new orders, employment and prices in the manufacturing sector.

March 2015’s reading is of particular importance because economic data from January and February are usually distorted due to the Chinese New Year holiday. Following the release of the PMI reading, the Hang Seng Index dipped by 0.3 percent, with the Shanghai Composite Index falling by 0.4 percent, demonstrating a loss of investor confidence.

News of the dismal manufacturing PMI statistic came hours before the decision of The People’s Bank of China (PBOC) to lower its guidance rate for the benchmark seven-day bond repurchase agreement. Despite the two interest rate cuts to the benchmark one-year loan rate since November 2014, as well as the reduction in the reserve requirement ratio, China’s economy seems to be headed towards a slowdown.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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