Australian Dollar (AUD) Moves from 4-Week High after Chinese Data

Ahead of the publication of the latest batch of inflation figures for the US, the Australian Dollar was trading in the region of a four-week high against the US Dollar. The South Pacific currency was supported against its US peer as a run of below-forecast ecostats for the world’s largest economy and comments from some industry experts appeared to support the case for US borrowing costs remaining on hold for longer than previously projected. The Vice-Chairman of the Federal Reserve, Stanley Fischer, did intimate that interest rates would need to be increased before the end of 2015, but added that ‘A smooth path upward in the Federal funds rate will almost certainly not be realised.’ His remarks bolstered demand for higher-risk assets like the ‘Aussie’ whilst reducing the appeal of the ‘Greenback.’

However, the Australian Dollar pared some of its recent gains against its US counterpart following the publication of less-than-impressive manufacturing data from China – Australia’s largest trading partner. The HSBC flash manufacturing Purchasing Managers’ Index softened from 50.7 in February to an 11-month low of 49.2 in March – moving back below the 50 mark separating growth from contraction. HSBC economist Annabel Fiddes noted; ‘The HSBC Flash China Manufacturing PMI signalled a slight deterioration in the health of China’s manufacturing sector in March. Renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work and cut their selling prices at a similarly sharp rate.’

Australia’s Conference Board Leading Index, which came in at 0.4% in January, had little impact on Australian Dollar trading, but the South Pacific currency could push higher during the North American session if the US Consumer Price Index remains in negative territory. Australian reports to look out for in the days ahead include the nation’s skilled vacancies figure and the Reserve Bank of Australia’s Financial Stability Review. Friday’s Chinese industrial profits data could also influence the direction taken by the ‘Aussie’.