The Australian dollar has started the new year in a slump, falling sharply below the 67 cent level versus USD on the open yesterday breaking its nascent Christmas rally. It was unable to recover most of those losses overnight as London/New York trade finally got underway:
Yesterday’s Chinese PMI print didn’t help matters – from Trading Economics:
The Caixin China General Manufacturing PMI fell to 49.0 in December 2022, the lowest since September and compared with the market consensus of 48.8 as a spike in COVID cases disrupted production. The reading pointed to the fifth straight month of drop in factory activity, with output, new orders, and export sales all declining further. Also, buying activity shrank the most since April, while employment dropped for the 9th month running without sign of a significant rebound, and backlogs of work fell for the third time in four months.
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The USD also gained ground against the majors but this hesitation to bid up the Aussie as China tries to navigate the post zero-COVID landscape could be troubling as more liquidity enters the FX markets and we get back to a more steady footing.
Of course, the absence of the RBA until early February will not help matters in terms of stabilisation or reaction to important economic prints, with the next monthly CPI indicator due next Wednesday.
