THE TAKEWAY: Chinese Manufacturing contraction deepened > Eurozone and Chinese weakness may spell trouble for Australian Exports > Australian Dollar Declined
The Australian Dollar declined versus the U.S. Dollar as the Chinese manufacturing industry contraction deepened further. At 2:18 GMT today the HSBC Flash Manufacturing Index data was released and reported a print of 47.8 for August which was worse than last month’s reading at 49.3. A reading below 50.0 indicates contraction.
The ongoing Eurozone recession may be a significant reason as to why production in China is down as Europe is a major consumer of Chinese goods. Moreover, recently the PBOC, China’s Central Bank, injected roughly 220 billion yuan into their banking system as part of a recent stimulus operation to combat their current domestic economic slowing.
China is a major consumer of Australian resources. It’s likely that a continuation of the Eurozone and Chinse slowdown will spell trouble for Australian exports, which could materially damage an already fragile Aussie economy. The Austrialian dollar is sensitive to interest rate changes as economic easing could hint towards future action on behalf of the RBA to introduce additional stimulus measures.
AUD/USD, 1 Minute Chart