China HSBC PMI data contracted for the eighth month in a row missing expectations of 48.4 as it printed at 48.1. This was a seven month low in the index indicating that so far the slowdown in Chinese manufactures shows no signs of a rebound.

Chinese manufacturing is clearly being affected by the turmoil in Europe which serves as China’s number one export market. New export orders fell to their lowest level since early 2009 as demand dropped.

The news weighed on risk in midday Asian trade with AUD/USD feeling the brunt of the selling as the pair slid from 1.0200 to 1.0150 in afternoon dealing in Sydney. Currency markets will now focus on flash PMI data from Europe with expectations that economic activity on the continent has stabilized at low levels. However if the European data surprises to the downside it could lead to further selloff in risk with EUR/USD drifting below the 1.2650 level as the day proceeds.

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