From a HSBC client note overnight, a bit of a recap of Thursday's moves and their outlook:
(note - this from the US morning, so bear that in mind when reading ... bolding mine)
AUD-USD threatening a breach back below the psychological 0.80 level. This softness in the AUD comes despite a weaker USD in early European trading and strong local manufacturing data overnight.
- Australian manufacturing is seeing a strong start to the year as most sub-measures of the AiG Manufacturing Performance Index rose.
- The main index lifted to 58.7 in January from 56.2 previously, with production up 5.7 points to 62.7 and new orders up 1.0 points to 58.8.
- Even so, the healthy figures have left little impression on the AUD, which looks set to revisit a 0.79 handle.
AUD-USD's impressive rally from 0.75 in mid-December to 0.81 in late January may finally be set for a correction.
- Near-term support below 0.80 comes in at 0.7916.
In the note, while not specifically on the AUD, HSBC discuss the China manufacturing PMI yesterday ... China data impacts AUD of course:
China's Caixin Manufacturing PMI figure came in better than expected at 51.5 vs Reuters consensus of 51.3.
- This was in line with last month's 51.5 reading and, while better than anticipated, it does hint of a slowing in the rate of expansion as overall new business orders and exports rose at a softer pace.
- The official PMI reading came below expectations at 51.3 earlier in the week. USD-CNY is off yesterday's lows but still holding below 6.30. We recently revised our year-end target down to 6.20
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Just on the note and the Australian dollar ... the AU-US 10 year yield spread continues to narrow. This too is weighing on AUD.
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