Australian Dollar Steady Despite China PMI Beat, AUD/USD Elevated
- China’s Caixin Manufacturing PMI came in at 51.5, well ahead of expectations
- The sector turned in its strongest reading since August
- However ,AUD/USD attention was clearly elsewhere
An Australian Dollar market which retained a distinct holiday torpor Tuesday failed to move much on news of a significant beat for Chinese manufacturing.
December’s Purchasing Managers Index for private firms from Caixin came in at 51.5. That was hugely better than both the 50.7 reading expected and November’s unrevised 50.8 print. In the logic of PMI surveys any reading above 50 signifies expansion for the sector in question. December’s performance puts the sector very much back on the road after a couple of more tepid prints. It wasn’t all good news though. Caixin said that while there had been stronger gains for both overall output and new orders, confidence for the coming year remains historically weak.
The Caixin snapshot is additional to China's official PMI. That covers the larger concerns which often have heavy state involvement. It was released last Sunday and registered 51.6. That was a slip from November’s 51.8 but still in line with expectations.
All up China looks well on track to hit its official growth target of 6.5% or better this year. However, growth will remain at multi-decade lows even if it does. The Australian Dollar can act as the markets’ favourite liquid China bet thanks to Australia’s huge raw-material export links with the world’s second-largest economy. However, there was little sign of it doing so Tuesday in markets which still looked affected by holiday absences.
On its broader, daily chart AUD/USD has risen sharply away from the long downtrend channel which persisted for much of 2017, to the point where it has reached highs not previously seen since late October.
However, the Aussie has strayed into quite heavily overbought territory, and the new year may well bring fresh signs of worry about its strength from the Reserve Bank of Australia. Some profit taking once trade gets back into full swing would be little surprise. The next major piece of Australian economic data will be the trade balance figures which are due on Friday.
--- 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.