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%.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets