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AUD/USD Higher On Improved Chinese Manufacturing

Jimmy Yang

Talking Points

  • AUD/USD higher after China reports improvement in manufacturing sector
  • Couldspur demand for Australian exports and reduce expectations for dovish RBA policy
  • HSBC data, RBA meeting to present risk ahead

The Aussie traded higher against the US Dollar at the open as data from the weekend showed improvements in China’s manufacturing sector. Chinese PMI rose to 51.0 in August to beat expectations for a more modest 50.6. This marks the highest reading since April 2012 and the 11th consecutive month of expansion. Further evidence suggesting stabilization of industry in China could have positive implications for the Australian economy. As large trading partners, a pickup on the mainland could drive more demand for commodities from Australia’s exporters. This could reduce investor expectations for the RBA to lower its benchmark interest rate to encourage growth and move AUD/USD higher.

A confirmation of Chinese data from HSBC at 1:45 GMT could reinforce such speculations and drive the currency higher. However, a divergence could lead investors to question the validity of the data and correct the pair lower. The key event this week likely remains the RBA rate decision on Tuesday at 4:30 GMT. Although investors are not expecting a rate decrease, they will likely be looking towards the central bank’s rhetoric to weigh their expectations for future monetary policy.

AUD/USD (5-Minute Chart)

AUDUSD_Higher_On_Improved_Chinese_Manufacturing_body_Picture_1.png, AUD/USD Higher On Improved Chinese Manufacturing

Source: FXCM Marketscope

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Jimmy Yang, DailyFX Research Team

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