Australian Dollar Stays Down Despite Better China Caixin PMIs
- China’s Caixin service sector PMI bounced back in October
- Its 51.2 reading was well away from September’s very marginal growth
- Still, the Australian Dollar market wasn’t interested
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An Australian Dollar already hit by weak domestic data Friday couldn’t rouse itself much for much better news out of China’s service sector.
The October Purchasing Managers Index of smaller, private companies from media group Caixin came in at 51.2, well above September’s shaky 50.6. Coupled with the as-forecast Caixin manufacturing PMI already released, that gives us a composite reading of 51. PMI surveys are so structured that any reading above 50 signifies growth. Along with the official readings, which gauge activity at the larger, state-run firms, October’s Caixin PMIs paint a picture of modest if measurable growth and leave China probably on target to hit Beijing’s growth marker for this year of “6.5% or above.”
However, the AUD/USD market was not greatly interested. The Australia Dollar can act as a liquid China proxy bet in the foreign exchange markets. It doesn’t always do so, though, and on Friday investors seemed more taken up with those domestic concerns.
More broadly, AUD/USD is clearly stuck in the enduring downtrend from September’s peak.
However, it perked up a little this week thanks to some strong Australian trade data and seems to be building a modest base around this week’s lows.
The Reserve Bank of Australia’s monetary policy decision looms this coming Tuesday. If the central bank seems as reluctant as ever to raise interest rates anytime soon, and as worried as ever about undue Aussie Dollar strength, then that downtrend could quickly be back on track.
--- 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.