The aussie was sent over 100 pips higher at the open on the back significantly better than expected manufacturing PMI data out of China, before retreating slightly. China's official manufacturing PMI figure printed at 53.1 from 51.0 previously, stunning many investors that were expecting the number to slide a little following the drop in the unofficial number from HSBC.
These figures are providing a significant boost for risk sentiment as investors take the opportunity to price in a decreased chance of a hard landing for the Chinese economy. However, we are taking these figures with a grain of salt given the weak private sector PMI data, which highlights the going gap between sentiment in the public and private sectors. Moving into the rest of the year, we expect the weak levels of demand stemming from Europe will continue to weigh on exporters in China, leading to a more domestic demand focused economy. Accordingly, we are looking for some growth supportive policy easing measures from Beijing throughout the rest of 2012, including cuts to the required reserve ratio.
In Japan, the Tankan large manufactures index printed at -4, lower than economists estimates of -1. Non-manufacturing, however, came in line with consensus estimates of 5. USD/JPY shot higher on the back of the data, sending the pair through 83.00.
Looking ahead, we have building approvals out of Sydney at 11:30 local time. Current estimates put the headline figure at +0.5%m/m for March, which is slightly lower than the prior month's 0.9%m/m increase
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