October 25, 2012
Way to go, Aussie! After tumbling for the past four days, AUD/USD was able to break its losing streak and end in the green yesterday. The pair found support around the 1.0250 area, climbed to a high of 1.0367, then eventually closed at 1.0338. Will it be able to hold on to its gains today?
Thanks to better than expected Australian CPI and a slight improvement in China's HSBC flash manufacturing PMI for October, the Australian dollar was able to end higher against its major counterparts during yesterday's trading.
Australia's quarterly CPI came in at 1.4% for Q3 2012, higher than the estimated 0.5% uptick. While this initially led to speculations that the RBA wouldn't need to cut rates anytime soon, a closer look at the components of the report would reveal that a huge chunk of the increase was merely a result of the newly implemented carbon tax. Analysts say that this tax on emissions mostly from mining companies and manufacturing firms contributed anywhere from 0.5% to 0.7% to the quarterly increase in price levels.
Meanwhile, China reported slower contraction in its manufacturing sector for October as the HSBC flash manufacturing PMI climbed from 47.9 to 49.1. Although the figure is still below the 50.0 mark and still doesn't indicate industry expansion, the fact that the reading is at its highest level in three months was enough reason for the Aussie bulls to party! After all, the continued improvement in China's manufacturing conditions could eventually lead to higher demand for raw materials and commodities from Australia.
There are no economic reports due from Australia for the rest of the week, which means that the Aussie could either continue its rallies from these recent reports or take its cue from risk sentiment. Keep a close eye on U.S. earnings reports as these seem to have a huge impact on sentiment these days!
"The only cable I watch is the pound baby."