China Caixin Manufacturing PMI: 51.8 vs 51.7 in October, propels AUD to session highs

The November China Caixin Manufacturing PMI (Markit, sponsored by Caixin) has been released which follows a surprise weekend Manufacturing PMI which recorded its first expansionary print in six months. The weekend data was moving back above 50, reflecting that manufacturing activity has improved from contraction to expansion sparking a bid in risk-on FX and in the aussie.

China Caixin Manufacturing PMI outcome

China Caixin/IHS Markit November Manufacturing PMI at 51.8 (vs 51.7 in October).

"China's factory activity unexpectedly expanded at the quickest pace in almost three years in November, with solid increases in output and new orders, a private business survey showed on Monday," Reuters reported, however, noting that "business confidence slipped and companies were reluctant to replenish their inventories, worried about the uncertain outlook for demand and the prolonged China-US trade war."

FX implications

AUD is higher on the release. Risk appetite has been elevated on the weekend data resulting in softness the yen and nice bid in AUD which was already +0.16% higher ahead of the latest data releases. Meanwhile, China's economic growth has been cooling to near 30-year lows. Markets are pricing in the likelihood that Beijing will have no choice but to roll out stimulus more quickly and more aggressively. The yuan and AUD, (a proxy to Chinese economic performance), will suffer from such sentiment.