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Aussie dollar plunges in first day trading of 2019 after weak Chinese Caixin PMI

The Australian dollar plunged to fresh lows after private Caixin data shows China’s factory activity contracted in December for the first time in 19 months

The Caixin/Markit December PMI index fell to 49.7 from 50.2 in November, following weak official PMI data released earlier in the week.

The already negative PMI released on Monday indicated there was strain on China’s manufacturing sector, reinforcing sentiment of a weak economy.

Monday’s release showed China’s official PMI saw factory activity contracting for the first time in over two years, pressured by weak exports.

The Caxin/Markit survey is a private survey that focuses on smaller businesses, differing from the official data released on Monday.

Australian dollar plunges below 0.700

TheAUD/USD fell below 0.7030 on Wednesday reacting to the Caxin data, with support at 0.7015/20.

New orders fell for the first time in 2 and a half years, with new export orders shrinking for the ninth consecutive month.

Analysts fear the Chinese economy may come under pressure as business conditions are expected to deteriorate in the new year.

US President Donald Trump said last weekend that talks with Chinese President Xi Jinping were progressing, however analysts say even if a deal to end the trade war was around the corner, China’s economy would still be heading towards a downturn.

China’s economic slowdown

IG market strategist Jingyi Pan says the decline of China's manufacturing PMIs brings home the idea of a growth slowdown for Asia's largest economy.

‘The simultaneous decline of China's manufacturing PMIs into contractionary territory really brought home the idea of growth slowdown for Asia's largest economy against the backdrop of US-China trade complications, implicating markets.’

She says the new orders component declined for the first time in two and a half years reflecting poor business sentiment, likely marred by the spate of tariffs exchange between US and China.

‘Alongside the Q4 GDP miss from Singapore, there had just been a series of blows from the data this morning for the region.’ Jingyi Pan said.

Asian stock markets lower upon the Caixin release, with the AXJ index down -0.90%.

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