Muted trade ahead of Chinese PMI

15.15 AEST, Friday 31 May 2013

Muted trade ahead of Chinese PMI

By Tim Waterer (Senior Trader, CMC Markets)

The US Dollar has certainly enjoyed a ‘May to Remember’ however the buying momentum has curtailed towards month end. US data continues to be dissected by traders searching for clues on what the future may hold for the QE time horizon, with the market volatility witnessed in May likely to carry forward into coming months. The latest GDP result from the US did nothing to strengthen the case for early QE tapering and any further softness from the macro indicators could lead to further unwinding among long USD positions.

On Asian markets today the modest rebound in the Nikkei was not overly surprising given the Thursday fall. However, elsewhere across the region things were more subdued with traders exhibiting caution at month’s end ahead of the latest Chinese PMI result due on the weekend. The performance of Australian equities to end the week was nothing to write home about with the ASX200 pushing mildly higher after the Thursday fall. Resource stocks found support due to a rise in precious metals prices, with the gold pushing higher overnight thanks to a weaker greenback. Overall it was a fairly languid day of trade on the local market to cap off what has been a volatile month.

The Australian Dollar dipped lower today however the currency has managed to hold onto most of the gains made over the last few trading sessions. The combination of a lower US Dollar and higher commodity prices has served the AUD well and has provided a realistic chance for the currency to reach US$0.97 over the coming days depending upon how the Chinese PMI results pan out over the weekend. The Australian Dollar is particularly sensitive to the Chinese economy and the fact that we have such an important indicator just around the corner explains why there was a muted performance by the AUD today.

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