Australian Dollar Rises After Chinese PMI Beats, RBA on Deck
- CaixinChinese Mfg PMI rose to 51.1 in July, showing second consecutive month of expansion
- Australian Dollar rose against its major counterparts following the better-than-expected data
- RBA monetary policy announcement key to gauge the likelihood of continued follow-through
The Australian Dollar extended its gains from Monday following better than expected Chinese Manufacturing PMI data from Caixin. The index rose to 51.1 in July from 50.4 in June, marking a second consecutive month of expansion in the manufacturing sector and the fastest pace of growth since March.
The Aussie continued to rise alongside local bond yields following the data, implying the markets read the outcome as broadly supportive of a more hawkish RBA policy stance. This likely reflects China’s role as Australia’s largest trading partner, accounting for nearly 33 percent of all exports. The majority of this trade is based in manufacturing-linked materials such as coal and iron ore.
The PMI data comes roughly 3 hours prior to the Reserve Bank of Australia’s policy meeting. No change is expected, putting the onus on the accompanying statement for guidance on where Governor Philip Lowe and company will steer in the months ahead. It remains to be seen whether that will complement or countervail the influence of Caixin’s report.