Forex - Aussie dollar gains after slew of mostly upbeat data points

Investing.com - The Aussie gained Monday on a slew of data that painted a mixed, but mostly upbeat, picture with data from top export destination China a factor as well.

AUD/USD rose 0.04% to 0.7651, while USD/JPY eased 0.01% to 124.15.

The China HSBC Manufacturing PMI for May met expectations at 49.2, a slight tick up from 49.1 in April, with the official CFLP at 50.2, a mild improvement from the previous month but just short of the expected 50.3.

"The May CFLP PMI rose slightly, indicating economic growth is moving toward stabilization," said Zhang Liqun, a government economist, on the CFLP PMI.

While Annabel Fiddes, economist at Markit, on the HSBC PMI, said it "signalled a further deterioration in the health of China's manufacturing sector in May."

"A solid fall in new export work contributed to fewer new orders, which in turn led to the first contraction of output in 2015 so far. Furthermore, sustained job cuts, ongoing destocking activities and
reduced purchasing activity all suggest that the sector may remain in contractionary territory as we head into mid-year. The latest survey data therefore suggest that more stimulus measures may be required to help boost domestic demand and recover some growth momentum."

Earlier, the Australia AI Group manufacturing index rose 4.3 points to 52.3, the highest since October 2013.

Manufacturing is getting a boost mainly from food and beverages which are supported by local demand and exports as a result of a lower exchange rate.

"The flow of benefits for domestic producers from the lower Australian dollar is picking up as exports recover some of the ground lost in recent years," said AI Group Chief Executive Innes Willox.

"This was a clear positive for performance in May together with strong residential construction activity and very low interest rates and helped propel the sector into expansionary territory for the first time in six months. There remains a fine balance, however, and the rapid decline in mining construction, the progressive closure of automotive assembly and subdued local business investment in machinery and equipment continues to weigh on local demand."

In Japan, capital spending for non-financial firms jumped 7.3% year-on-year in the first quarter, compared to an expected drop of 0.1%. Japan manufacturing for May was steady at 50.9 as expected.

Also in Australia the Melbourne Institute inflation gauge for May rose 0.3% month-on-month, unchanged,building approvals fell 4.4%, more than the 2.0% decline seen, business inventories for the first quarter rose 0.4%, more than the 0.1% seen and company profits for the first quarter gained 0.2%, less than the 0.5% quarter-on-quarter expected.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted up 0.23% to 97.17.

Last week, the dollar slipped lower against the euro on Friday after data showed that the U.S. economy contracted in the first quarter, but recent indications of a rebound in growth continued to support expectations for higher interest rates.

The Commerce Department said U.S. gross domestic product contracted ant an annual rate of 0.7% in the first three months of the year, instead of the initial estimate of 0.2% growth. However, it was still better than economists’ forecast of a 1% contraction.

The single currency remained under pressure as Athens continued long-running negotiations with its lenders on a cash-for-reforms deal ahead of a €305 million payment to the International Monetary Fund due on June 5.

The dollar strengthened broadly in May as stronger U.S. economic data prompted investors to bring forward expectations on the timing of an initial rate hike by the Federal Reserve.

Upbeat reports on inflation, new home sales, business investment and consumer confidence during the month all indicated that the economy is gaining momentum after a weak first quarter.

In the week ahead, Friday’s U.S. employment report will be closely watched for signs of improvement in the labor market. Central bank meeting in the euro zone, U.K. and Australia will also be in focus.

Also on Monday, Germany is to release preliminary data on consumer prices. The euro zone is to release final data on manufacturing sector growth.

Later in the day, the Institute of Supply Management is to release data on U.S. manufacturing activity.