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Chinese data dampens Aussie dollar

Chinese data dampens Aussie dollar

By Tim Waterer (Senior Trader, CMC Markets)

There is no shortage of key events to guide financial market sentiment this week, with the upcoming Bernanke testimony before congress sure to garner plenty of attention from the international investment community to say the least. The stance taken by Bernanke over the US economic outlook will set the table one way or the other for US Dollar direction this week as traders attempt to gauge the FOMC’s preferred timeline for the asset purchase program.

Risk assets from around the globe will take their cues from the Fed Chairman with a key point of interest being whether his testimony is singularly supportive of continuing asset purchases or whether his tone reflects the assortment of opinion contained in the most recent Fed Minutes.

With some clarity appearing to emerge concerning the next Bank of Japan governor, Asian markets commenced the new week in positive territory with gains across the key regional bourses. Further yen weakness was the theme of the day with traders foreseeing the proposed easing measures coming to fruition with the likely appointment of Kuroda as BOJ Governor. The result being that the key yen cross rates were up across the board today.

The Australian Dollar predictably weakened from its earlier highs above 1.03 today after the release of below-forecast Chinese manufacturing data. While the HSBC Flash Manufacturing PMI reading of 50.4 was far from terrible, it did underwhelm a market which has become accustomed to Chinese indicators going from strength to strength. With there being an air of disappointment over the latest Chinese manufacturing data, there was an easing in the price action of some higher yielding assets.

It went from looking like a great day to just a good day on the Australian sharemarket after the underwhelming Chinese manufacturing data dissipated some of the earlier buying momentum. Undoubtedly the Materials sector suffered a setback today on the release of the Chinese data and with some of the big miners reversing course the broader market slipped from the session highs. However, Materials weakness was more than offset by strength in other segments of the market with the banking and retail stocks enjoying a positive outing today courtesy of strong offshore leads.

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