Australian Dollar Gains After China Caixin PMI Beats Expectation

Talking Points:

• AUD/USD gained after Caixin PMI beat the consensus forecast
• 48.4 in January vs 48.1 expected and 48.2 in December
• News flow may have altered traders’ timing of a RBA rate cut

See how retail traders are positioned in the Australian Dollar with the DailyFX SSI.

The AUD/USD exchange rate rose after China’s Caixin manufacturing PMI data came out better-than-expected. The private sector’s figure showed the industrial sector contracted slower than anticipated. January’s print was 48.4 as opposed to economists’ estimate of 48.1 and December’s 48.2 reading.

Australian front-end bond yields rallied with its currency, indicating that the markets may believe that the Caixin news-flow deterred near-term RBA rate cut bets. China is Australia’s main trading partner. A Chinese industrial sector ebbing slower than expected may have pushed back traders’ speculation of when the Reserve Bank of Australia could implement accommodative policy.

Coming out ahead of the Caixin print was the government’s PMI statistics. The manufacturing PMI figure for January was 49.4, weaker than the forecasted 49.6 and December’s 49.7 reading. This marked the lowest level since September 2012. Non-manufacturing PMI, for the same period, came in lower at 53.5 versus the prior figure of 54.4. The Aussie’s lackluster response to the initial set of data may have been due to traders waiting for the full set of PMIs before choosing a directional bias.