Focus on Asia
This week in the markets is all about a lot of fundamental economic data and input from key central banks.
We did not have anything scheduled for Monday, but during the Asian session that just passed, we got some facts from three crucial Asian economies.
It all started with Chinese manufacturing data. You could say that China is the workshop of the modern world, so this is always going to be an important metric. The Manufacturing PMI exceeded expectations, with the survey measuring a net optimism, and a total number of 51.2 as compared to an expected 50.4.
This is bullish for China and for the global economy generally, as it showed that manufacturing orders seem to be increasing. Asian economies such as Australia tend to be particularly impacted. There is another reason why Chinese data weighs heavily upon Australia – they are a leading producer of raw materials for manufacturing, so if manufacturing is roaring ahead in China, its going to be good news for Australian production as their raw materials will be in increasing demand.
Then the Bank of Japan released their monthly statements, leaving all their key policies unchanged and surprising nobody. This had little effect on the Yen as there was nothing to chew on here.
Finally, the Reserve Bank of Australia released its Rate Statement and Cash Rate. There were no big surprises here either, but the RBA decided to leave Australian monetary policy unchanged when there was some chance of a weakening. This would logically contribute to more bullishness on the Australian Dollar.
For these reasons, it is no surprise that the biggest gainer of all the major currencies today as at the time of writing is the Australian Dollar. When there are two high-profile items that point towards a currency’s strengthening or weakening, short-term trading over the next few hours can become a lot easier and more predictable!