Chinese services PMI surprised to the upside hitting a four month high as it rose to 56.1 versus 55.6 the month prior. This the best reading since September of last year and the tenth consecutive month that the service sector PMI remained above the 50 boom/bust line suggesting that the Chinese economy may have stabilized with economists predicting that overall GDP growth rate in Q4 of this year increased to 7.8% from 7.4% the quarter prior.

As China begins its shift towards more consumer led rather than export led growth the country’s services sector is likely to take on more importance in the overall growth composition. Today’s data highlighted the importance of retail and lodging industries in the country’s growth plans and indicated that consumer demand remains relatively robust.

Chinese as well as Japanese markets remain closed for New Year’s holidays leaving trading in Asia relatively thin but the positive news helped to keep the AUD/USD bid with the pair remaining near the 1.0500 through most of Asian session trade even as EUR/USD sold off on further profit taking. The euro continues to selloff into early European session as traders keep an eye on the German labor data due at 9:00 which promises to be the key economic event of the morning.

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