China’s yuan surges as PMI data beats estimates

Yuan advances versus the dollar first time in four days

The release of China’s August PMI data confirmed that the Chinese economy appears to be robust, despite the ongoing tariff wars with the US. Manufacturing PMI rose to 51.3 from 51.2 in July, topping market expectations of a drop to 51.0. The index has been in expansionary territory since July 2016. The services sector fared equally well, with that PMI jumping to 54.2 from 54.0 the previous month and confounding forecasts of a dip to 53.8.

The yuan strengthened versus the US dollar, halting a three-day slide which saw USD/CNH rise to 6.8362 yesterday. The pair is currently trading at 6.8496 after dropping to 6.8387. The data helped the Chinese share market recover from yesterday’s deep slide, with the China A50 index rising 1.23%, though the “Trump Tweet” factor continues to be a burden.

USD/CNH Hourly Chart

Source: Oanda fxTrade

Trump wants to go ahead with tariffs

Latest tweets from Donald Trump suggest he wants to impose the next tranche of tariffs on a further $200 billion worth of Chinese goods as soon as the public consultation exercise is complete. That’s due to be done by September 4, so there is a growing risk that more negative tariff news could hit the wires as early as next week. Not content with escalating the trade war with China, President Trump is now having a go at the World Trade Organization, saying he would pull out of it unless they “shape up” and treat the US better.

Another brick in the tariff wall?

The Asian session saw USD/JPY consolidating the big drop witnessed late yesterday, though we did see an early spike lower to 110.880, the lowest in six sessions. The pair is now at 111.060, hovering just above the 200-hour moving average at 110.989.

USD/JPY Hourly Chart

Source: Oanda fxTrade

Euro-zone consumer prices seen steady

The data calendar appears packed for the rest of the day, though most of the releases are low-tier. Major highlights include provisional Euro-zone CPI, expected to be stable at +2.1% y/y while, ahead of the long Labor Day weekend, the North American session sees Chicago PMI (a dip to 63.0 from 65.5 expected) and Michigan sentiment (an improvement to 95.5 from 95.3 seen).

The full MarketPulse data calendar can be viewed at: https://www.marketpulse.com/economic-events/

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