Australian Dollar Brushes Off Worse-Than-Expected China PMIs

Talking Points

• The Australian Dollar was little changed against its major counterparts
• Chinese manufacturing PMI in-line, Caixin reading worse than expected
• The “Brexit” vote could be mentioned in next week’s RBA rate decision

Keep an eye on short-term trends for Australian Dollar crosses using the Grid Sight Index (GSI) here.

The Australian Dollar offered a tepid reaction against its major peers to Chinese manufacturing PMI readings. In June, the world’s second largest economy saw neither improvement nor a slowdown in the manufacturing sector. PMI registered on the dot at 50.0 as expected compared to 50.1 in May. A reading above 50 indicates expansion while a reading below marks contraction.

Shortly afterwards, the Caixin PMI registered at 48.6 in June, worse than the 49.2 figure estimated. This marks the lowest private sector manufacturing reading since February. Yet again, the Aussie showed a small response.

Since China is Australia’s largest trading partner, economic slowdown in the former nation can have a domino-like negative effect on the latter. This could in turn cause the Reserve Bank of Australia to react accordingly by easing. The recent “Brexit” vote scarred the markets and an RBA rate decision is upcoming. Traders’ may be reticent to take on exposure as they wait to hear how the UK referendum and its market-wide impact may translate into monetary policy.