The Australian dollar was briefly propelled higher by an unexpected increase in activity in China’s private manufacturing sector. HSBC’s reading of China’s flash September Manufacturing PMI jumped to 50.5, up from last month’s final reading of 50.2 and better than an expected fall to 50.0. The figures are mildly encouraging because they point to stabilisation in China’s manufacturing sector.
The slightly positive surprise was enough to propel AUDUSD up to a resistance zone around 0.8900, but the pair failed to break through this level. This isn’t surprising given that today’s report will likely be drowned out by fears about China’s growth story.
The biggest threat comes from China’s overheated property market. In fact, partly in response to falling property prices and lacklustre economic data Beijing eased policy twice last week in a bid to spur credit. The first was the PBoC’s decision to inject around 500bn yuan into the banking system, before the bank also cut the 14-day repo rate by 20bps to 3.5%.
These moves from the PBoC come on the bank of increased concern about the ability of the world’s second largest economy to reach its 7.5% growth target for the year. Many banks have cut their growth forecasts to below this level in recent weeks and even some officials in Beijing have suggested that growth slightly the government official forecast would be acceptable.
The Aussie
Overnight, the aussie was hit by a wave of sellers as iron ore prices drop through an important psychological barrier around $US80 a ton. There isn’t much potential headline making economic data out of Australia this week, but RBA Governor Stevens is speaking at 1230AEST on Thursday. In any event, the market will likely be focused on the US for a slew of Fed speakers and economic data.
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