China PMIs at multi-year highs

Decade high China Caixin manufacturing reinforces recovery trend

Topping the consensus estimates across the official PMIs and the Caixin manufacturing PMIs, the latest readings had been a strong affirmation of continued improvement in economic conditions for China. Specifically, official PMIs from the national bureau of statistics had reflected the strongest manufacturing PMI print seen since September 2017 while services had risen to the highest noted since 2012. The positive trend had been reinforced by the Caixin manufacturing PMI with the strongest reading seen since November 2010, highest in a decade.

Subcomponents across both the official and Caixin manufacturing PMIs had continued to affirm broad-based expansion, particularly as one look across the new orders and export orders components. Despite concerns and expectations of slowdown into November on the back of the rising Covid-19 cases globally and fresh restrictions seen particularly in Europe, the early indicator out of China had allayed some of the fears here.

This joins the US Markit PMIs in surprising on the upside so far though the Euro area had notably come under the resurgence pressure. In turn, this continues to place China and surrounding areas in a sweet spot with the sustained recovery on hand, but expansion yet to reach a stage to any shift to policies.

USD/CNH downward bias intact

USD/CNH had stalled in the downtrend alongside most USD/Asians likely as a result of a pause from the market. That said, continued inflows noted into Asia and emerging markets continue to be supportive for further downsides for risk sensitive currencies including Asia FX. A clear break below the strong 6.55 support will however be needed to continue the decline for USD/CNH with the PMIs proving to be supportive for the offshore yuan so far.