Talking Points:
- China’s private service sector has joined manufacturing in recording strong December gains
- The world’s number two economy is heading into an uncertain year in pretty good shape
- AUD/USD had already put in some gains on Wednesday, and didn’t push up much higher
The Australian Dollar gained modestly on its US cousin Thursday after the release of data showing that China’s private service sector picked up steam in December.
The Caixin China services Purchasing Managers’ Index rose to 54.4, from 52.4 in November, to print a 17-month high. The composite PMI melds both manufacturing and service sector data. It strengthened to a 45-month peak of 53.3.
PMIs are a globally recognized benchmark in which a reading above 50 indicates sectoral expansion. The data will soothe some worries about a “hard landing” for China’s economy even though growth there is clearly decelerating from the breakneck pace of the last two decades.
The Australian Dollar often functions as a liquid China proxy, and duly rose after the figures. However, it had already risen substantially against the greenback in a generally weaker-US-Dollar environment as some investors seem to have chosen to bank profits and, perhaps, wait to see what President-elect Donald Trump does in office.
Moreover, the minutes of the Federal Reserve’s last monetary policy meeting, released on Wednesday, saw some Federal Open Markets Committee members worried about the US Dollar’s strength. This led to a retreat for the currency in Asia, albeit from what are in many cases 14-year highs.
The China data failed to give AUD/USD huge impetus for another leg higher, with its post-data gains peaking at 0.72844, from 0.72804 just before the release.
Modest pickup: AUD/USD
Chart compiled using TradingView
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
