The news that Australian consumer price inflation accelerated by more than forecast in the fourth quarter dampened rate cut speculation and helped the ‘Aussie’ surge against its counterparts on Wednesday.
However, the South Pacific asset has since trimmed gains as a result of disappointing Chinese data.
As China is Australia’s largest trading partner a report showing that HSBC/Markit Flash Mfg PMI declined from 50.5 to 49.6 – falling below the 50 mark separating growth from contraction – weighed heavily on the ‘Aussie’.
Economists had forecast a reading of 50.4.
The report asserted that the dip was largely due to ‘cooling domestic demand’.
According to HSBC economist Hongbin Qu, the result ‘implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth.’
In the immediate aftermath of the data’s publication the Australian Dollar reversed its previous gain against the US Dollar and slid against the Euro and Pound.
The currency’s movement prompted this response from currency strategist Hideki Shibata; ‘The Aussie is more likely to fall. China’s growth outlook is posing a risk to countries like Australia that rely on trade with the nation.’
However, with yesterday’s inflation figures significantly lowering the odds of the Reserve Bank of Australia issuing a further rate cut in the first half of the year, the Australian Dollar continues to enjoy some underlying support.
The ‘Aussie’ was little affected by a domestic consumer inflation expectation report.
Economic news for Australian is now limited before the weekend, but today’s European and US data releases are likely to inspire market movement in the hours ahead.
As French and German manufacturing/services PMI showed expansion the Euro could extend gains.
Already this morning the common currency has advanced on the Pound , edging away from the one-year low recorded yesterday.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8198 ,
Euro,,Australian Dollar,1.5387 ,
Euro,,New Zealand Dollar,1.6403 ,