China Manufacturing Sector
On Monday, the Chinese economy was in the spotlight. The manufacturing sector was in focus. NBS private sector PMIs from the weekend painted a rosier picture of the Chinese economy. The Manufacturing PMI increased from 49.1 to 50.8, with the Non-Manufacturing PMI up from 51.4 to 53.0.
However, the Caixin Manufacturing PMI traditionally has more impact on market risk sentiment.
The Caixin Manufacturing PMI increased from 50.9 to 51.1 in March. Economists forecast a rise to 51.0.
Insights from the March survey revealed that,
- Manufacturing sector activity improved at the most marked pace in 13 months.
- Domestic and overseas demand signaled an improving macroeconomic environment.
- Chinese manufacturers responded to the shift in the demand environment, ramping up production.
- However, employment fell in March, with firms cautious about hiring.
- Average input costs declined for the first time since July 2023. Firms attributed the decline to falling prices for raw materials.
- Manufacturers reduced factory gate prices for the third month and at the most marked pace in eight months.
- Optimism across the manufacturing sector improved in March, with business confidence at the highest since April 2023.
March Survey Takeaways
A pickup in the demand environment and a downward trend in output price inflation could raise hopes of a pickup in economic activity through Q2. Input and output price trends aligned with investor bets on central banks, including the Fed, cutting interest rates in H1 2024.
The Aussie Dollar Reaction to the Caixin Manufacturing PMI
Before the PMI numbers, the AUD/USD fell to a low of $0.65164 before rising to a high of $0.65387.
US Dollar Index Price Forecast
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See all US Dollar Index forecastsHowever, in response to the PMI report, the AUD/USD rose to a high of $0.65267 before falling to a low of $0.65240.
On Monday, the AUD/USD was up 0.15% to $0.65250.
Up Next
US Manufacturing PMIs will garner investor interest later in the session. The ISM Manufacturing PMI will likely have more influence than the finalized S&P Global Manufacturing PMI.
Economists forecast the ISM Manufacturing PMI to increase from 47.8 to 48.4 in March. Investors must also consider the sub-components, including employment, new orders, and prices.
Beyond the numbers, investors must track FOMC member speeches. FOMC member Lisa Cook is on the calendar to speak. Reaction to the US Personal Income and Outlays Report could influence investor bets on a June Fed rate cut.
