USD/CNY – Gains in service PMI from HSBC and Chinese Offical Figures

Chinese Non-Manufacturing sectors continue to grow, with the latest PMI figures coming at 56.2. This may seem like a strong figure, but it is only marginally better than 56.1 print last month, showing no change in pace of growth. HSBC figures which was just released came in at 54.0, though lower than Chinese official figures, has a larger growth rate comparing to its previous print of 51.7. Generally, private surveys done by HSBC tend to be lower than Chinese official figures, due to “optimism” from the Government. However this trend appears to be changing with the latest HSBC Manufacturing PMI bettering official figures by a mile. Coming in at 52.3 versus 50.4 official.

When Manufacturing PMI was released, market focused more on traditional interpretation – Official figures barely showing growth, ergo manufacturing sector should be flat or contracting after filtering out over optimistic forecasts from the Government. This resulted in AUD/USD collapsing, with market disregarding HSBC figures as nothing more than a fluke. However with non-manufacturing sector figures showing similar trend, the “fluke” theory certainly deserve a re-look. The likelihood of a true Chinese economic growth is on the cards, but before that can be established, understanding on why official figures are depressed should be investigated.

Daily Chart


The immediate impact on USD/CNY is not really observable, as the Central Government has a tight lease on the movement of Yuan. Prices was supported just below 6.27 after the initial bullish mania after the temporary resolution of the Fiscal Cliff. Yuan became weaker as the PBOC guides USD/CNY higher, possibly scared after being uncertain if the huge bulge of Yuan strength will continue. Certainly, with stronger economic fundamentals, there will be more breathing space for the Central Government to start relaxing on the lease and allow a stronger Yuan, which is what Premier Xi has promised in 2013.From a Technical point of view, current price level is just around the ceiling for consolidation range between 6.27 – 6.30. A break above from current levels will push price higher to the 6.32 swing high and previous support around Sep 2012. A drop from here brings us back to 6.27 support with 6.28 acting as interim support.

Just a thought, could the Central Government wish to weaken the Yuan and hence intentionally publish weaker economic data in order to justify what they are doing? This theory borders along the insane and matches with all the conspiracy theories out there, but certainly is still an interesting thought.


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