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Euro Rallies despite Asia-Pacific Slowdown
The super economy of China that has dragged the global economy out of recession is beginning to show signs of a consolidation. China’s Manufacturing PMI for June produced a disappointing 52.1, instead of the forecast 53.2. It seems measures to prevent the economy from over heating are beginning to show sign of fruition.
Once again risk aversion pushed higher yielding currencies lower with AUD/USD suffering a 100pip decline. The move was exacerbated by weaker Australian retail sales, and a disastrous decline by -6.6% in building approvals. The data demonstrates that the RBA’s interest rate cycle has reduced demand for property buyers. With the Australian economy softening and the real threat of a slowdown in China, trader’s expectation for further interest rate hikes have been lowered. AUD/USD hit a low of 0.83126 during Asian trade but has since recovered slightly and is once again testing the 0.84000 handle.
Surprisingly, and in contrast with Asia, news out of Europe has surpassed expectation inducing a Euro rally against the dollar back above 1.23000. Sentiment towards the region seems to have improved for the time being after Spain’s successful bond auction and an interest rate hike by Sweden’s Riksbank eased fears of the on-going debt crisis. Today’s good news from the region has comes after the ECB’s tender drew less demand indicating a healthier European banking system.
Key data out of the U.S is the ISM Manufacturing PMI, Unemployment Claims and Pending Home Sales. If these disappoint we could see the Euro gains reversed as traders seek safety in the U.S dollar.
Published on Thu, Jul 1 2010, 10:42 GMT