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Aussie dips as Caixin PMI slips

By Andrew Robinson, Senior Market Analyst at MarketPulse

PMI lowest in three years

Caixin’s manufacturing PMI reading for January painted a different picture than that from the National Bureau of Statistics released yesterday. While the NBS PMI showed an improvement to 49.5 from 49.4, the Caixin reading slumped to 48.3, the lowest reading since February 2016, from 49.7 in December.

Within the headline numbers, there were mixed sub-readings. Interestingly, the sub-index for new orders fell into contraction territory yet the gauge for new export orders rose above 50 to hit its highest since March 2018 (coincidentally when the tariff wars first started). This could imply that export markets are still alive and well despite the trade troubles.

The contradictory headline number took some of the shine off the recent risk rally, with AUD/USD retreating on the day, possibly set to post the first down-day in three days. AUD/USD looks to have been capped by 200-day moving average resistance at 0.7300 this time round. USD/JPY is also poised for a third daily decline in a row as the yen’s safe haven status was rekindled. USD/JPY is down 0.03% at 108.86.

AUD/USD Daily Chart

Source: OANDA fxTrade

PBOC unleashes a higher USD/CNY fix

The China central bank fixed the USD/CNY rate higher this morning, the first time in five days. While the shift in trend could be explained by an uptick in the US dollar yesterday, some models were anticipating a lower fix on the 6.69 handle. The 6.7081 fix set the tone for USD/CNH to push higher during the morning amid short-covering. Given that today is the last trading day before the week-long Lunar New year holiday next week, there appeared to be a bit of a scramble to cover short positions, with USD/CNH currently posting the biggest one-day rally since December 21.

USD/CNH Daily Chart

Source: OANDA fxTrade

The FX direction, combined with the weaker Caixin PMI number, prompted weakness across the board in the equity space, with China shares dropping 0.37% and US futures implying a 0.64% drop in the NAS100 index.

Ding Ding, Round Three

No sooner had the doors closed on the second round of US-China trade talks of 2019, US President Trump announced that he was sending his top two trade negotiators, Mnuchin and Lighthizer, to Beijing in the middle of this month to extend negotiations. In a theme that has become all too familiar, China agreed to increase imports of US agriculture, energy, industrial products and services as the meeting concluded, China’s Xinhua news agency reported. The White House said there was still “much work to be done” ahead of the March 1 truce deadline.

The non-farm payroll monthly lottery is upon us

The January jobs report from the US is due today, with some analysts still unsure how the US government shutdown might affect the data. This is reflected in the wide range of forecasts in the latest Bloomberg survey of 74 respondents, which lie between -40,000 and +230,000, with most estimates centred round the 150,000-185,000 area. The unemployment rate is seen holding at 3.9% while average hourly earnings are seen ticking lower to +0.3% m/m from +0.4%.

Other data releases include the CPI readings for Europe in January and the US ISM manufacturing PMI, with forecasts suggesting a dip to 54.2 from 54.3.

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