Talking Points:
- China’s March Caixin manufacturing PMI undercut expectations
- The official measure released at the weekend had exceeded them
- AUD/USD took a little hit
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The Australian Dollar slipped very modestly Monday following the release of a private-sector Chinese manufacturing survey which missed forecasts,
The March Caixin Purchasing Managers Index came in at 51.0, below both the 51.7 expected and the previous month’s 51.6. In the logic of PMI data any reading above 50 signifies an expansion for the sector in question. Caixin said that demand had not been as strong as expected through the month, and that the growth momentum of Chinese manufacturing may have weakened but if so only marginally.
The release continues the trend of measurable-if-hardly-stellar performance from the world’s second largest economy, which chimes well with Beijing’s relatively subdued 2018 growth forecast of about 6.5%. The official PMI which concentrated on larger, state-run manufacturers was released last weekend. It came in at a stronger than expected 51.5, well above February’s 50.3.
The Australian Dollar often acts as a liquid China proxy thanks to its homeland’s strong raw material export links to China. It may have done so to a limited extent in this case, although the Easter Monday holiday has probably thinned trade in Australia Monday, as it will continue to do across Europe.
AUD/USD remains stuck in a broad downtrend with half an eye on Tuesday’s monetary policy decision from the Reserve Bank of Australia. This is thought extremely unlikely to produce a rise in current, record-low interest rates. However if the central bank remains relatively downbeat on the prospects for policy tightening then the Aussie could well slip further.
The pair seems to be flirting with a new, ‘lower low’ on its daily chart around current levels, but with markets thinned for this holiday period it might be wise to wait for conformation of this later in the week before taking any new position.
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--- Written by David Cottle, DailyFX Research
Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!
