China PMIs slow with Lunar New Year effect
China’s February PMIs disappointed across both manufacturing and services readings with the Lunar New Year effect in play. Rising input prices is worth watching as USD/CNH maintain the sideways action.
February PMIs suggest China still in the sweet spot
The official NBS PMIs, alongside the Caixin manufacturing PMIs, had disappointed in the latest February reading, though having all sustained in expansion territory. Seasonal decline with the Lunar New Year holidays had largely been blamed for the latest slide seeing both the official and Caixin manufacturing readings slipping to the lowest reading seen since May 2020. Notably, demand was seen softening into February as per the new orders and new export orders counters but had largely been viewed to be a result of the Chinese New Year effects.
Over and above the slowdown in both demand and output for the month, the employment gauge had notably also declined with more cautious approach towards staffing levels reported to have sustained according to Caixin’s findings. This again supports more gradual removal of accommodation by the authorities and bodes well for the Chinese market. At the same time, despite the blip that we have seen with the headline number, driven by the holiday effects, firms continue to a positive view on outlook which suggests that things continue to look up for the Chinese economy.
The only caveat here would be the effect of rising commodity prices and the corresponding lift in input costs noted that may dent the performance for smaller enterprises and broad demand going forward, one worth the scrutiny here.
USD/CNH taking a breather from the downtrend
Rising US Treasury yields had lent a hand to the greenback following months of USD/Asians declines. Specifically for USD/CNH, the pair had seen strong support coming through at the 6.40 level that had led to a deviation from the multi-month downtrend channel. Although prices had attempted to trade above its 50-day moving average, signalling upward momentum picking up, it had met resistance towards the 6.50 level. The conflicting forces of rising UST yields and positive fundamentals for China, as illustrated through the latest PMIs updates, could keep the pair rangebound between the 6.40-6.50 level in the near-term awaiting fresh triggers.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.