Aussie Dollar Continues Lower Despite Modest China PMI Beat
- The Australian Dollar was weaker after China’s PMI data
- But it had been slipping in any case
- The official PMI still suggests that China is stabilizing
The Australian Dollar slipped a little in the wake of Wednesday’s Chinese manufacturing data, but had been grinding lower in any case.
China’s industrial sector continued to expand in January but at a slower pace than it managed the month before, the official Purchasing Managers Index showed. It came in at 51.3. This was just below December’s 51.4 but just above the 51.2 level markets had been looking for.
In the logic of PMIs, a reading above 50 means expansion for the sector in question. A sub-50 print means contraction. The service-sector index was released at the same time. It was healthier, rising to 54.6 in January from 54.5 the month before.
Markets tend to watch the manufacturing version more closely, but this could change given services’ increasing economic weight. Consumption now accounts for much more than 50% of China’s GDP, where once heavy industry ruled.
All up though, the figures likely mean that China continues to stabilize economically. Sure its 6.7% 2016 growth rate was the weakest for a quarter-century. But it was well within Beijing’s forecast range and not hugely below 2015’s rate.
Clouds still glower over the future, of course. Investors are leery of China’s bloated debt levels, and wont to fret about what a US move towards protectionism could mean for globalization’s champion.
China is the key market for Australian commodity exports, and the Australian Dollar certainly weakened after the data. AUD/USD fell to 0.75566 after the numbers, from 0.75680 before them. Then again it got as high as 0.7605 in the US session, but has meandered lower since as investors eye Thursday’s monetary policy decision from the US Federal Reserve.
The US central bank isn’t expected to alter its monetary settings. However, markets will want to see if anything has changed in the Fed’s assessment that rates will probably rise three times this year. The China data may have had its claws blunted a little by the fact that Chinese markets are largely absent at this time for the long, Lunar New Year break.
Heading down anyway: AUD/USD
Chart Compiled Using TradingView
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.