Trouble is brewing in China. Again. The China Flash Caixin manufacturing PMI (formerly backed by HSBC) fell to 47.1 points, reflecting deeper contraction. This was lower than 48.2 expected and below 47.8 seen in July.
The Australian dollar didn’t like it and dipped below 0.73 to 0.7286. While the pair didn’t hit the multi-year lows just yet, the RBA’s decision on September 1st just became tougher.
The pressure on the Aussie was seen also beforehand: the worsening conditions in Australia’s No. 1 trade partner have been brewing for quite a while. The devaluation of the yuan, first seen as stimulus, are not seen as a sign of panic from the authorities in Beijing.
The The 2 year low in the indicator shows that the Chinese economy “is still in the process of bottoming out” according to the report’s author, Dr. He Fan. This doesn’t look too good.
What will the RBA do?
The RBA convenes on September 1st to make its monthly rate decision. This comes just hours after the final read for this report as well as the official manufacturing PMI from the Chinese government.
Commodity prices, on which the Australian economy and the Australian dollar heavily rely upon, are squeezed as well. This goes hand in hand with the Chinese issues of course.
Can AUD/USD hit 0.70?
Here is the chart:
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