Australian Dollar, China Caixin Service Sector PMI Talking Points:
- China’s private service sector outperformed in September
- The Caixin PMI indicator hit a 3-month high
- This brought some respite from much gloomier manufacturing figures
Fourth-quarter technical and fundamental forecasts from the DailyFX analysts are out now.
The Australian Dollar only ticked up Monday despite a much better than expected performance from China’s private service sector.
Its Purchasing Managers Index from the Caixin media company came in at 53.1. That was a three-month high and well above both the expected 51.4 and August’s 51.5. With the manufacturing variant already released at a 16-month low of exactly 50, Monday’s release made for a composite PMI of 52.1.
In the logic of PMI data, any reading above 50 signifies expansion for the sector in question. The headline was clearly above that but the survey details were a little more mixed. New-orders rose sharply while employment levels contracted. That said the headline was clearly upbeat, and a marked contrast with more gloomy data from China’s manufacturers, perhaps indicating that the service sector is weathering this time of trade spats with the US more convincingly.
The Australian Dollar often acts as the foreign exchange markets favored liquid China proxy thanks to its home nation’s strong export links to the world’s second largest economy. It didn’t obviously do so in this case, however, ticking up just slightly. Despite the growing importance of China’s service sector, the manufacturing PMIs still seem to have more market impact.
In any event, more domestic factors seem to be driving AUD/USD trade at present.
The Australian Dollar remains in the pervasive downtrend on its daily chart, which has endured all year- taking AUD/USD down to lows not seen since early 2016. With the Australian Official Cash Rate expected to remain at its already venerable record low of 1.50% for all of next year, the interest rate differential should continue to yawn in the US Dollar’s favor.
The Aussie has also suffered from trade friction between the US and China. Australia relies on the former for much of its security and on the latter for its vast raw-material export trade. so is perhaps uniquely exposed to rising tensions between the two global giants.
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--- Written by David Cottle, DailyFX Research
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