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China Manufacturing PMI at a 15-month low

Friday, Jul 24 2015
The preliminary China Caixin purchasing managers index (PMI) surprised markets by dropping to a 15-month low in July, with analysts pinning the hit on the recent stock market crash and weak export demand. The index, fell to 48.2, coming in well below the 49.8 forecast. The reading reflects the negative impact of the stock market crash, the weaker outlook for consumption and the worsening of availability of funding for investment.
 
After the data, the Australian dollar dropped as low as $0.7293 - its lowest against the greenback since May 2009, during the Global Financial Crisis - from $0.7345 before the release. China is among Australia's largest trading partners, offering a market for resources exports. The Shanghai Composite held on to gains, although they narrowed. The data mark a sharp contrast to China's quarterly gross domestic product (GDP) data released last week, which beat forecasts by showing 7.0 percent growth, renewing long-standing concerns over data accuracy.
 
Today's PMI reading suggests that the improvement in momentum seen at the end of the second quarter may not have extended into the start of the third quarter and that downside risks to growth remain. Concerns about slowing economic growth on the mainland have spurred policy makers to action. Late last month the People's Bank of China (PBOC) cut interest rates and the reserve requirement ratio (RRR) for some lenders in a bigger-than-expected easing package.
 
Aussie is currently being traded slightly below 0.73 handle. Pair is likely to find support around 0.7250 and resistance above 0.7350 area. Later today, in the US session, Manufacturing PMI and New Home Sales figures are scheduled for a release.
More in this category: « Unemployment Claims decreased to 255,000 French Manufacturing PMI fell below 50 level »

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