Chinese PMI data is overshadowed by PPI figures from Australia

The most anticipated release of the session was flash Chinese manufacturing PMI data, which provides the market with an insight into the private manufacturing sector in China and, in turn, the domestic economy. Yet, the biggest market moving event of the session was PPI data out of Australia which printed well below consensus estimates, resulting in the market shedding the aussie as investors priced in an increased chance of a rate cut next month.

Manufacturing PMI inched closer to expansion territory in April according to a survey released by HSBC, coming in at 49.1 from the prior 48.3. Reaction in the FX market was limited, however, due to the indistinct nature of the print, with some investors taking the data as a sign the Chinese economy is on the right path but others pointing towards the fact that the headline figure was still in contraction territory. Also, given the disconnect last month between this figure and the official figure many investors may be waiting for confirmation from the official figure before jumping to conclusions. Taken alone, each figure is skewed towards particular parts of the economy, with today’s figure being focused more on the private sector and the official figure being more representative of the public sector. The situation is compounded by the fact that there is some disagreement between economists about which print paints a more accurate picture of the Chinese economy and is therefore more important.

Before the market turned its attention to Beijing, investors nervously waited for the release of producer prices out of Australia, with the official PPI figure printing much lower than market expectations at -0.3%q/q and 1.4%y/y (exp. +0.4%q/q and 2.2%y/y). The resulting sell-off of the aussie saw it sink around 30pips against the dollar, and the pair continued to slide, eventually hitting a low around 1.0325 as investors priced in an increasing chance of a rate cut next month by the RBA. IB cash rate futures jumped a little higher on the back of the release, with the May contract now suggesting there is around a 92% chance of a 25bps rate cut, up from 88% before the release.

Nevertheless, the market will be carefully analysing tomorrow’s consumer prices figures, which may prove to be the final nail in the coffin for those still believing the RBA will not move to cut rates next month. Current estimates suggest CPI will increase around 0.7%q/q which should keep the annual rate around 2.5%, which is in the middle of the RBA’s target range and, therefore, should enable the bank to cut rates.

Overall, price action in the FX market late in the session was fairly muted. EURUSD failed to hold a break back above 1.3200 early in the session, but found some support around its 15min SMA. Looking ahead, around 1.3200 may remain a significant resistance level for the pair until eurozone PMI figures are released early in the London session. The yen strengthened early in the session, with USDJPY sinking over 30 pips, but regained some ground late in the session.

A late rally for equities in Asia was not enough to bring all the major markets in Asia into the green, with the ASX 200 currently trading in the red by around 0.23% but the Nikkei has recently just pushed into positive territory by around 0.08%. Commodity prices were mostly flat – gold held above USD1640.00 but failed to break USD1644.00.

Источник: Forex.com

23.04.2012