Chinese Economy Treading Water; AUD Looking Up
Jason Syd | Jun 05, 2014 07:42AM ET
The Chinese economy is struggling to regain momentoum following the induction of the new Xi JingPing government last year. The petering out of the local property market which was supported by the government has put pressure on growth.
The latest HSBC Services PMI came in at 50.7 falling from 51.4 in April. The year-on-year trend is pretty much flat, from 51.3 same time last year. Over the weekend, the offical China Manufacturing PMI for May was 50.8, the highest level since November. With these mixed numbers and no clear trend from the last 12 months, we can infer that a hard landing is not yet on the cards repeat the same mistake . This is not likely to happen anytime soon either. In the event of an upturn in the global economy, the RBA will lead the rate cycle just like after the financial crises.
AUD/JPY is a carry trade play so will be a positive carry position. However, traders and investors should be conscious of the swift turnaround if sentiment or data turns for the worse. Always keep an eye on the exit unless you have conviction.
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