The Australian Dollar only manged to inch higher against its US cousin on Tuesday despite a raft of quite robust data out of China.
The official October Purchasing Managers index for the manufacturing sector came in at 51.2. That was well ahead of the 50.4 seen in September.
Completing a trifecta of better news, the official non-manufacturing PMI was 54.0, up from 53.7 in September. (In the logic of PMIs any print above 50 signifies expansion in the sector.)
Recent data have suggested a degree of stabilization in the world’s number-two economy, with annual growth of 6.7% in the second and third quarters. September’s producer prices increased for the first time in nearly five years.
However, this latest slew of quite robust numbers left the markets’ favourite liquid China proxy largely unmoved.
The Australian Dollar was at US$0.7603 before the numbers. It’s at $0.76099 at 0150GMT.
Of course, the pair isn’t only and always a China proxy, even if Australia’s strong export links to China mean it often is.
Sometimes it tells us about local Australian economics. At others it’s more a bet on what US interest rates will do.
That could be the case this time. The Aussie has failed to rise much above the $0.77 handle since last week’s local consumer price data indicated some stabilisation and seemed to make further Australian rate cuts less likely. There have also been increases in the prices of coal and iron ore – Australia’s key exports – again without much obvious Aussie-dollar lift.
However, with the markets still looking towards higher US rates by year end, the Aussie could simply be prey to the fact that, while things look bullish for it, they might well look more bullish for the US Dollar.
It’s probably also worth remembering that Tuesday is Melbourne Cup Day in Australia. Often described as the “horse race that stops a nation,” it’s possible that many Australian trading desks are more thinly staffed than they’d otherwise be.