The Australian dollar has jumped out of the blocks to start the new trading week

Patrick Smith/Getty Images
  • The Australian dollar has jumped out of the blocks in early trade on Monday, supported by stronger-than-expected Chinese economic data released over the weekend.
  • Renewed optimism over US-Sino trade talks helped to lift investor sentiment on Friday.
  • There’s a raft of economic data releases scheduled both at home and abroad on Monday.

The Australian dollar has jumped out of the blocks upon the resumption of trade on Monday, supported by better-than-expected Chinese economic data released over the weekend.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7118 , 0.0023 , 0.32%
AUD/JPY 79.02 , 0.17 , 0.22%
AUD/CNH 4.7845 , 0.0013 , 0.03%
AUD/EUR 0.6337 , -0.0005 , -0.08%
AUD/GBP 0.5457 , -0.0006 , -0.11%
AUD/NZD 1.0431 , 0 , 0.00%
AUD/CAD 0.9506 , 0.0034 , 0.36%

After closing last week at .7094, the AUD/USD rose to as high as .7129, helped by a rebound in China’s official manufacturing PMI to 50.5 in March. Markets had been expecting a smaller increase to 49.5 following a 49.2 reading in February.

A far slower deterioration in activity levels at small and medium-sized manufacturing firms, along with stronger growth in new domestic orders, was largely responsible for the improvement seen from February.

Separately, activity levels across China’s non-manufacturing sectors improved at a faster rate in March, helped in part by a strong lift in construction activity.

“This is the first month in four that Chinese manufacturing activity has returned to growth and suggests a read through of Chinese macro policy growth support beginning to flow through into the economy,” said David de Garis, Economist at the National Australia Bank.

“After markets closed with something of a risk on tone at the end of last week, the China PMIs for March seem to have added a little more to that mood, helped along with positive mood music around the continuing US-China trade talks.”

On Friday, Xinhua, a Beijing based official newswire, reported that Chinese and US negotiators had made “new progress” towards a trade agreement after a series of meetings in Beijing.

That was confirmed by positive rhetoric from the US negotiators with Treasury Secretary Steven Mnuchin calling the talks “constructive” while Trump’s chief economic adviser Larry Kudlow acknowledging that the two sides made “good headway”.

The news flow explains the strength in the Aussie against both the US dollar and Japanese yen in early deals on Monday.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, there’s a plethora of economic data releases scheduled both in Australia and abroad that look set to keep markets on their toes.

Domestically, two manufacturing PMI reports for March will be released, along with data on home prices, inflation, new home sales and the National Australia Bank’s latest business confidence survey.

The latter, in particular, could generate short-term volatility in Australian financial markets during the session.

Outside of Australia, markets will also receive manufacturing PMIs from China, Japan, Eurozone, the UK, Canada and United States. Japanese manufacturing sentiment, Eurozone inflation, along with retail sales and construction spending from the United States, will be the other headline acts.

Given the sharp recovery in the official China manufacturing PMI in March, the separate Caixin-IHS Markit China manufacturing PMI will be closely watched on Monday, and will likely dictate sentiment in the second half of the Asian session.

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