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Talking Points:

  • Aussie Dollar unable to capitalize on upbeat AIG manufacturing data
  • Data showed fastest pace of factory-sector activity growth since 2002
  • Tepid response may reflect data’s limited impact on RBA policy bets

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The Australian Dollar edged lower within its intraday range after the release of August’s AIG Performance of Manufacturing (PMI) survey. The headline index printed at 59.8, implying sector activity growth at the fastest pace since 2002.

AIG PMI is a measure of manufacturing strength, where a reading above 50 means the sector is expanding and anything below is a contraction. The index, released monthly, has been indicating consecutive expansion in the factory sector since September 2016.

The Aussie Dollar seed to look through the data and local bond yields were unmoved, implying the markets did not take it to mean much for the RBA policy outlook. That may be because the central bank didn’t include manufacturing on its list of closely-monitored indicators when officials last opined the matter.

It is also possible that the RBA’s worries about the currency’s appreciation has been interpreted to mean that a near-term rate hike is not in the cards whatever data flow may cross the wires. That would make the PMI print nearly meaningless for FX markets. A hike isn’t seen as likely before the second half of 2018.

Aussie Dollar Unable to Capitalize on Upbeat Manufacturing Data