CNH: USD/CNY Makes Fresh Low For This Year, Fixing Error Little Changed

• CHINA SETS YUAN CENTRAL PARITY AT 7.1710 MON VS 7.1695

The preliminary June S&P Global PMIs showed that services activity in Australia ended Q2 on a more positive note with the index up to 51.3 from 50.6. Manufacturing was stable at 51.0 as the global market becomes more challenging, which left the composite up to 51.2 from 50.5, the highest since March. The Q2 average composite PMI was 50.9 down slightly from Q1’s 51.1, signalling that growth was little changed and remained positive but lacklustre.

Australia GDP q/q% vs PMI services quarter average

• Activity is being supported by domestic demand with an increase in new business but export orders shrank at their sharpest in almost a year often due to US protectionism. Services orders rose at a faster pace but were almost steady for manufacturers, S&P Global reported.
• Businesses seem fairly positive regarding the outlook with hiring continuing, although it slowed, and confidence improving. Sentiment was its highest since January but the optimism was not broad based with manufacturers more pessimistic but they still increased staffing.
• The moderation in cost and selling price inflation was good news for monetary policy, with the latter its lowest since November 2020. Input inflation only moderated for services, while manufacturers saw an increase in shipping and raw material costs, according to S&P Global, which have been impacted by global developments. With oil prices up around 25% in June and petrol prices up over 8c/L, costs are likely to rise in coming months depending on the outcome of the conflict in the Middle East.
• The difficult environment facing manufacturers could also been seen in the drop in their purchasing and running down of inventories. 

The market has gapped lower on the Asian open but no real follow through as yet as investors digest the implications of the weekend's bombing. ESU5 -0.45%, NQU5 -0.55%. The AUD short will remain a favorite way to express the markets view that risk is potentially turning lower.

• EUR/AUD - Friday night range 1.7730 - 1.7881, Asia is currently trading around 1.7845. The pair has bounced off its 1.76/77 support area and while this holds the markets focus will be on potentially testing the 1.8000 area again. Should risk remain under pressure and momentum begin to grow, this move higher is likely to extend.
• GBP/AUD - Friday night  range 2.0769 - 2.0874, Asia is trading around 2.0845. This pair is back in the middle of its 2.0500-2.1050 range. A break above 2.1050 is needed to see the move higher once more gain momentum.
• AUD/JPY - Friday night  range 93.83 - 94.28, Asia is trading around 94.30. Choppy price action as the pair establishes a range between 92.00 - 96.00. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again. The move higher in oil and a market already very long JPY is preventing this pair moving lower in reaction to risk for now.
• AUD/NZD -  Friday night range 1.0800 - 1.0828, the cross is dealing in Asia around 1.0815. The cross is struggling to get any momentum back above 1.0800 for now, it needs to hold above here and start extending higher to put a higher low in place. The longer it fails to extend the higher the chances it begins to drift lower again, a break sub 1.0750 will see momentum return.

Fig 1: GBP/AUD spot Hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P