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Chinese Manufacturing Sparks a Rally in Risk FX

Last updated 1/4/2010 4:16 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

 Manufacturing data from Asia Pacific offered a mixed batch of results on the first full trading day of the new  year with Australian numbers disappointing but Chinese PMI readings hitting all time highs. The Australian AIG Manufacturing Index printed at 48.5 versus 51.2 the period prior – its first decline in 4 months and the first time below the key 50 boom/bust line since August of 2009. The news suggests that the ultra hot Aussie economy, which has been the best performer in the G-20 universe may be beginning to cool off, although it is far too early to draw any definitive conclusions given the strength of activity in the rest of the region.

Chinese Manufacturing PMI on the other hand hit an all time since records first began   in April of 2004 recording a reading of 56.1 versus 55.1 the month prior. Chinese factory production surged in December with exports and employment components up strongly although prices also increased at the fastest rate in 17 months sparking concerns over inflation. Nevertheless, the news out of China signals that the recovery trade is alive and well as the Asian giant continues to be the key engine of global growth.

Risk currencies reversed their opening session slump in the wake of the strong Chinese PMI news with EUR/USD trading at 1.4350 after tumbling to lows of 1.4270 in early Asian trade while Aussie recaptured the .9000 handle after dropping to a low of .8940 at the start of the Monday open.  All eyes will now turn to the US ISM Manufacturing data with markets looking for a rise to 54.1 in December from  53.6 in November as the global economic recovery continues to gain momentum.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.