Aussie boosted by China news
The Australian dollar led commodity currencies higher on Monday as China hinted at more stimulus while a small improvement in Chinese manufacturing PMI numbers also boosted sentiment.
China’s State Council said on Monday that it would implement new measures to drive consumption in the automobile, real estate and services sector. The move follows positive commentary around stimulus from last week’s Politburo meeting.
The region was also helped by a better-than-expected manufacturing purchasing manager index number. The July manufacturing PMI result was reported at 49.3 – above the 48.9 expected – with a notable improvement as inventories were run down. However, construction continued to signal a stark slowdown.
In combination, the news drove commodities prices higher, with crude oil up 1.6% to USD81.85 per barrel, copper up 2.1% to USD4.00 per pound, and iron ore up 1.3% to USD112.69 per tonne.
Asian FX gains, but not JPY
The Australian dollar outperformed with the AUD/USD up 1.0%.
The Aussie was higher across markets with the AUD/EUR up 1.2% and AUD/GBP also up 1.2%.
The NZD/USD was also stronger with the pair up 0.7%.
The Chinese yuan and Singapore dollar saw small gains.
The biggest losses were seen in the Japanese yen as the impact of Friday’s Bank of Japan decision weighed on the JPY. The BoJ’s small tweak to its yield curve control policy wasn’t enough to help the JPY gain – the USD/JPY climbed 0.8% as the JPY fell.
RBA due at 2.30pm AEST
The Aussie’s gains came ahead of today’s critical Reserve Bank of Australia decision at 2.30pm AEST.
Financial markets see a 26% chance of a 25-basis point rate hike to 4.35% (source: Refinitiv).
A Reuters survey of economists published last week found 20 out of 36 of economists expected the RBA to hike.
Of the big four, CBA and Westpac are looking for a rate hike, while ANZ and NAB expect the RBA to keep rates on hold.
With financial markets seeing only a one-in-four chance of a hike, any increase might drive a sharp jump in the AUD/USD. However, the wording in today’s statement will also be crucial – if the RBA signals a pause in hikes, the Aussie could fall.
Aussie jumps across markets on China hopes
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Calendar: 31 July – 4 August
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