Chinese Growth Continues To Slow
Manufacturing activity in China dropped to its slowest pace in eight months in July. The Purchasing Managers Index (PMI) dropped to 50.1 from 50.2 in June, with analysts expecting the figure to rise to 50.30 last month.. A reading above 50 indicates an expansion in activity, while below 50 means a contraction and the weaker-than-expected Chinese factory data sparked demand for the Japanese currency amidst a risk-off trading session.
The official PMI was the lowest reading since November and is the most recent indication that the growth of the Chinese economy is slowing. Factory output was still expanding, but new orders, including export orders, contracted in July more than they had in June. GDP in China fell to a 3 year low of 7.6% in the 3 months of Q2. The USD/JPY was down 0.13% whilst the EUR/JPY was at 95.91, down 0.24%, up from a low of 95.71 and off a high of 96.10. The pair sought to test support at 95.54, the July 30th low, and test resistance at 96.28, the July 31st high.
The Euro continued to suffer in overnight Asian trading, primarily lower in anticipation of the European Central Bank’s statement on monetary policy due out on Thursday, but also on the disappointing data released on Tuesday. Yesterday, the eurozone’s consumer price index remained steady at 2.4% in July, meeting expectations, but separate data released showed that the unemployment rate in the eurozone increased to 11.2%, a new record high. Germany’s unemployment rate remained stable at 6.8%, but Italy’s unemployment rate jumped to 10.8% in June, the highest level since records began in 1999.
The greenback traded higher against most major currency pairs on heightened speculation that the Fed will make no big announcements about a need for stimulus at a monetary policy meeting later today. The US Dollar index which measures the USD against a basket of 6 weighted currencies was 0.04% up, trading at 82.76.
Much of today’s investor’s focus will be on the Fed’s interest rate decision and FOMC statement, but keep an eye on the US ISM manufacturing index results as well as manufacturing PMI from Spain, Europe and the UK for increased volatility.
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