- AUD / USD is trading in the red near 0.7350 versus 0.7381 at the start of Asia.
- NBS’s Chinese manufacturing PMI improved estimates to signal an expansion in August.
- AUD’s overbought is struggling to boost morale on good Chinese data.
The Chinese manufacturing sector unexpectedly expanded in August. So far, however, the data has failed to revive the purchase of the sensitive Australian dollar from China.
NBS’s Chinese manufacturing PMI, which focuses primarily on state-owned enterprises, fell to 51 in August from 51.1 in July. The actual reading, however, is way above expectations for 48.7. A reading above 50 indicates an expansion in activity.
The non-manufacturing PMI rose to 55.2 in August from 54.2 in July and improved estimates to 52.1.
The surprise expansion of the manufacturing sector adds credit to recent speculation about a faster than expected economic recovery in the world’s second largest economy. In addition, this is a positive development for base metals and industrial products like iron ore, one of Australia’s main exports.
Even so, the Australian dollar is struggling to make offers. In fact, AUD / USD fell ten pips from 0.7357 to 0.7347, following the release of China PMI data and is currently reporting a 0.2% decline on the day. The pair hit a multi-year high of 0.7381 on Monday morning.
AUD / USD could see a deeper drop in the day ahead as technical indicators point to overbought conditions. AUD / USD has rallied nearly 1,900 pips over the past 5-1 / 2 months.
The declines, however, could be well supported, thanks to the Federal Reserve’s latest move to introduce inflation targeting, under which the central bank would allow inflation to exceed the 2% target for a period of time. before raising rates.