Intraday Market Thoughts

China PMI Slows

by Ashraf Laidi
May 1, 2011 19:09

Currency market liquidity likely to remain constrained as trading in the UK and much of Europe will be closed on Monday. Likewise in Asia, China is closed for its Labor Day while Japan is open briefly before closing for much of the balance of the week on Golden Week Holiday. Thin markets could potentially exacerbate the impact of a worse than expected April Manufacturing PMI from China coming in at 52.9 - below consensus 54.0.

China's PMI figure also represents the 2nd lowest print in the past 8 months and speaks loudly to the effect of China's efforts to rebalance its economy.

Aussie dollar would be the most directly impacted currency in the event of a pronounced risk appetite retreat, which may be brought about by profit-taking in thin markets. As we pointed out on Friday, COMMITMENT OF TRADERS' SPECULATIVE POSITIONING in AUD net longs has been trimmed to 80.9K contracts. Despite the 13-handle runup in AUD/USD over the past 7 weeks, that net long exposure is a 4-week low. RBA rate decision coming up this Tuesday presents a key event risk for the Aussie - until then, short-term may be vulnerable to a test of Friday's 1.0920 resistance turned support.

By GG - Staff


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