Australian Dollar Sold as Chinese Manufacturing Activity Stagnates

Talking Points

• Australian Dollar Sold on Unexpected Slump in Chinese Manufacturing
• Eurozone PMI Revisions Headline Quiet European Economic Calendar

The Australian Dollar underperformed in overnight, down as much as 0.7 percent against its top counterparts, after Chinese Manufacturing PMI data showed factory-sector activity unexpectedly shrank in August. The official reading released on Saturday revealed the index fell to 49.2, the lowest in nine months. A print below "50" implies contraction. The bulk of the decline came from a slump in raw-materials inventories, pointing to ebbing demand for Australia's key export commodities. The country counts on China as its top trading partner and owes much the mining boom keeping the economy afloat to sales to the East Asian giant.

The economic calendar is relatively quiet in European hours and price action is likely to prove somewhat muted with US financial markets absent for the Labor Day holiday. Final revisions of Augusts' Eurozone Manufacturing PMI figures are on tap but their market-moving potential seems limited. Indeed, after twelve consecutive months of retrenchment, continued bad news has probably lost some of its punch. Implications for ECB monetary policy outlook likewise seem limited, further denting the potential for significant volatility, as traders remain preoccupied with the possible emergence of the central bank's bond-buying later in the week.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Terms of Trade Index (QoQ) (2Q)	-2.6%	-2.0%	-2.3%
23:01	GBP	Lloyds Business Barometer (AUG)	10	-	-8
23:30	AUD	AiG Performance of Manufacturing Index (AUG)	45.3	-	40.3
23:50	JPY	Capital Spending (2Q)	7.7%	8.9%	3.3%
23:50	JPY	Capital Spending excl Software (2Q)	6.6%	7.8%	3.5%
0:00	AUD	RPData-Rismark House PX Actual (AUG)	0.0%	-	0.6%
0:30	AUD	TD Securities Inflation (MoM) (AUG)	0.6%	-	0.2%
0:30	AUD	TD Securities Inflation (YoY) (AUG)	2.2%	-	1.5%
1:00	CNY	Non-manufacturing PMI (AUG)	56.3	-	55.6
1:30	AUD	Company Operating Profit (QoQ) (2Q)	-0.7%	1.0%	-3.7% (R+)
1:30	AUD	Inventories (2Q)	0.6%	0.2%	1.3% (R+)
1:30	AUD	Retail Sales s.a. (MoM) (JUL)	-0.8%	0.2%	1.2% (R+)
1:30	AUD	ANZ Job Advertisements (MoM) (AUG)	-2.3%	-	-0.8%
2:30	CNY	HSBC Manufacturing PMI (AUG)	47.6	-	49.3
5:00	JPY	Vehicle Sales (YoY) (AUG)	7.3%	-	36.1%
6:30	AUD	RBA Commodity Price Index (AUG)	90.3	-	94.4 (R-)
6:30	AUD	RBA Commodity Index SDR (YoY) (AUG)	-13.7%	-	-9.8%

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
7:15	CHF	Retail Sales - Real (YoY) (JUL)	-	3.7%	Medium
7:30	CHF	SVME-Purchasing Managers Index (AUG)	49.1	48.6	Medium
7:45	EUR	Italian PMI Manufacturing (AUG)	45.0	44.3	Low
7:50	EUR	French PMI Manufacturing (AUG F)	46.2	46.2	Low
7:55	EUR	German PMI Manufacturing (AUG F)	45.1	45.1	Medium
8:00	EUR	Euro-Zone PMI Manufacturing (AUG F)	45.3	45.3	Medium
8:30	GBP	PMI Manufacturing (AUG)	46.1	45.4	Medium

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.2503	1.2647
GBPUSD	1.5798	1.5916

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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