Australian Dollar, AUD/USD, China, US Dollar, USD/CNH – Talking Points

  • China’s PMI revealed an expansionary outlook regardless of hurdles
  • Restrictions from a zero-case Covid-19 coverage nonetheless undermine prospects
  • Australian knowledge shocked to the upside.Will it assist AUD/USD get better?

Chinese manufacturing PMI for June printed at 50.2 in opposition to 50.5 anticipated and the non-manufacturing got here in at 54.7, a large beat on the 50.5 forecast. This mixed to give a composite PMI learn of 54.1 in opposition to 48.4 beforehand.

At the identical time that China PMI got here out, Australian non-public sector credit score for May confirmed progress of 0.8% month-on-month in opposition to 0.6% anticipated.

This contributed to an annual learn of 9.0% year-on-year as a substitute of 8.6% anticipated. This reveals upward revisions to prior months.

That knowledge was on the again of yesterday’s Australian retail gross sales for the month of May rising by 0.9% month-on-month as a substitute of 0.4% anticipated.

The China PMI indices are the results of a survey of three,000 producers throughout China, largely giant corporations. It is a diffusion index, so a studying over 50 is considered as a constructive for the financial outlook for the world’s second largest economic system.

The manufacturing quantity was a small miss, however the rosy outlook from the non-manufacturing has excited the market. USD/CNH moved decrease, reflecting shopping for of Chinese Yuan on the information.

The backdrop to the Chinese PMI knowledge noticed Covid-19 restrictions being eased this week. The variety of days required to quarantine on arrival dropped to 10-days from 21-days. This contains quarantine and dwelling monitoring.

This motion raised hopes that additional easing of restrictions is likely to be forthcoming and an finish to the financial crippling zero-case Covid-19 coverage is likely to be close to. A calming of the strict Covid-19 guidelines is seen as aiding financial progress.

These hopes had been rapidly dashed when President Xi Jinping got here out and stated that China will proceed with their zero-case coverage.

An issue haunting markets is that there doesn’t appear to be any obvious exit technique for China from the pandemic period.

AUD/USD had been weighed by promoting strain going into at present’s knowledge releases. The US Dollar had rallied in latest periods on recession fears and the Fed’s skill or in any other case to orchestrate a gentle touchdown for the US economic system. This appeared to drive the market towards perceived protected havens.

The RBA Governor Philip Lowe stated final week that the financial institution shall be debating between a 25 or 50 foundation level charge rise at their assembly subsequent Tuesday. Today’s knowledge and yesterdays retails gross sales numbers may need confirmed the bigger charge hike is imminent.


Chart created in TradingView

— Written by Daniel McCarthy, Strategist for

To contact Daniel, use the feedback part under or @DanMcCathyFX on Twitter

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