Australian dollar jolted by soft China data and mixed local action
The Australian Dollar slipped after China’s primary manager’s index (PMI) data missed estimates, adding to concerns about the global growth outlook and if the slowdown continues, will it sink AUD?
The Australian dollar dipped toward its six-month low under 65 cents after Chinese PMI missed forecasts. The data appears to have further fermented the perception that the world’s second-largest economy is struggling to reignite growth as it re-emerges out of the pandemic era.
Chinese manufacturing PMI for May printed at 48.8 against the 49.5 anticipated and the non-manufacturing came in at 54.5, against the 55.2 forecast. This combined to give a composite PMI read of 52.9 against 54.4 previously.
The China PMI indices are the result of a survey of 3,000 manufacturers across China, mostly large firms. It is a diffusion index, so a reading over 50 is viewed as a positive of the economic outlook for the Middle Kingdom.
At the same time that China PMI came out, Australian private sector credit for April showed growth of 0.6% month-on-month against the 0.3% expected.
This contributed to an annual read of 6.6% year-on-year against 6.8% prior. The monthly CPI gauge from the Australian Bureau of Statistics (ABS) ticked higher to 6.8% year-on-year to the end of April, above forecasts of 6.4% and 6.3% previously.
Today’s data comes on the back of yesterday’s disappointing Australian building approvals for the month of April which fell by -8.1% month-on-month instead of the 2% rise that had been anticipated.
Elsewhere today, RBA Governor Philip Lowe appeared before the Senate Economics Legislation Committee earlier in the day and he reiterated the bank’s determination to fight inflation.
He cited the issues of wage-price pressures and the difficulties of getting CPI back within the target range of 2- 3% when wage-price index is at 3.7%. He also noted that September will see a significant amount of fixed-rate mortgages rolling off from very low rates to today’s much higher borrowing costs.
Interest rate futures are expecting no change at the RBA’s monetary policy meeting next Tuesday.
For the Aussie dollar, a sluggish Chinese economy and a negative interest rate differential to many parts of the world might continue to undermine the currency.
AUD/USD price reaction: 1-minute chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only