Better than expected Chinese PMI

The China Manufacturing PMI was released today and it came in at 50.4 for August against the expected 49.8. Any figure above 50 means that an expansion is taking place and these figures show that manufacturing is expanding at a good pace in China. This will keep the yuan highly supported in the coming weeks and will give the Chinese one less thing to worry about.

The Australian retail sales data was released and it came in at a flat 0% m/m against the expected 0.3%. This was a big miss from the expectation and though the Australian dollar took a slight hit immediately after the data, it has now settled down a bit. And with good Chinese data coming out, it should support the economies that are based on commodities like that of Australia.

On the technical front, the USD strength that was witnessed since the beginning of the week seems to be tapering off with the GBP gaining strength across the board and the euro also caught within a range. The NFP that will be released tomorrow will be key as a large part of the market expects a hike in September but that will greatly depend on data like the NFP. A bad data or a miss in the NFP will almost confirm that there will be no hike in September and will lead to loss of USD strength for a couple of weeks. We continue to believe that there will be no hikes this year in the US.

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