The Takeaway: Chinese manufacturing PMI slightly rebounds after a 3-month decline -> Tepid Chinese growth signals risk for Australian exports -> AUD/USD declined
The Australian Dollar declined against all of its counterparts on the disappointing Chinese manufacturing PMI, which rose to 50.9 in March and slightly rebounded from its third consecutive month decline. The figure came in below estimate set for 51.2, compared to 50.1 in February. The latest PMI is consistent with the historical trend as it tends to post an increase in around March and April.
The disappointing PMI suggests that the recovery in China is growing, albeit in a slower pace than anticipated. In particular, the softening activities in the manufacturing sector suggested that demand for Chinese goods grew at a slower pace even after the Chinese New Year holiday in February. The worse-than-expected PMI heightened concerns for Australian export sectors. Although the market is pricing in a slim 8 percent probability that the RBA will cut the interest rate on Tuesday, the slowing Chinese manufacturing activities could spur the RBA to lower rates in the next twelve months.
The Australian Dollar declined against all of its counterparts. Upon the release of the figure, the AUD/USD shed 23.2 pips but immediately clawed back some of its losses. Looking ahead, FX traders will focus on the RBA rate decision on Tuesday for more guidance on the Australian dollar.
AUD/USD 1-Minute Chart
Chart Created by Robin Leung using Marketscope 2.0
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