Talking Points:
- China’s private sector service firms did a little less well than expected in February
- However steady growth remains the watchword
- The Australian Dollar ticked down but market focus is clearly elsewhere
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The Australian Dollar ticked down Monday following the release of Chinese service-sector data which missed forecasts by the merest whisker.
February’s Purchasing Managers Index for the private service sector from media group Caixin came in a 54.2 when expectations had centered on a print of 54.3. February’s reading was also well below January’s 54.7. Along with the Caixin manufacturing survey released last week (modestly above forecasts), the composite index was 53.3, below the previous month’s 53.7.
In the logic of PMI surveys any reading above 50 signifies expansion.
The Caixin versions are released a little after official Chinese PMIs which focus on the larger, state-run concerns. The manufacturing version of that missed forecasts last week but much of that weakness was put down to factory stoppages around the long Lunar New Year break.
Overall the Chinese economy appears to be making decent headway into 2018, with measureable if not stellar growth seen. China set Monday an official growth target of ‘around 6.5%’ for this year, leaving out its usual stated aim of hitting a faster pace if possible. China-watchers believe that its rulers are now as concerned with financial stability as they are with economic expansion.
The target was released ahead of Premier Li Keqiang’s report to the National People’s Congress now under way in Beijing. 2017’s growth of 6.9% fit nicely with that year’s target of ‘6.5% or better’
Still, AUD/USD was lower after the release of those PMI numbers.
On its broader, daily chart the Australian Dollar remains in a downtrend against its US big brother from the three-year highs printed in January. With the respective monetary policies of the US and Australia now firmly skewed in favor of the former this perhaps should not be a surprise.
However, there are three heavyweight Australian economic events this week with an interest rate decision from the Reserve Bank of Australia, a speech from the Governor and official GDP data due. AUD/USD could be range bound until both are out of the way. Investors will be keen to see whether the RBA dials up its rhetorical opposition to AUD strength. It was disinclined to do this while the US Dollar was under general pressure but, now that it is rising, it may feel empowered to help it along a little.
--- Written by David Cottle, DailyFX Research
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