Notable weakness was seen in the US dollar in the Asian session, this followed the recent FED and ECB policy decisions. The GBPUSD pair started to gain above the 1.2600 level and the euro recovered above the 1.1000 handle.
On the data front we saw China’s services PMI for April came in strong but showing some signs that economic momentum is moderating. The data was still strong, and the market generally took it as a positive sign.
The Caixin China General Services PMI declined to 56.4 in April 2023 from March’s 28-month high of 57.8, pointing to the fourth straight month of expansion in the sector, after lifting COVID-19 restrictions although expansion slowed slightly, as new orders growth eased.
Meanwhile, employment continued to rise, boosted by plans to increase capacity and greater new order volumes. That said, the rate of job creation slipped to a modest pace that was the softest seen in the current three-month period of payroll growth, while backlogs of work continued to rise.
The rate of accumulation was similar to that seen in the prior month, however, and only mild. On the price front, input cost inflation accelerated to a 12-month point, due to higher staffing costs, alongside greater prices for raw materials and office supplies.
Meantime, output cost inflation rose only slightly as firms south to boost competitiveness and attract sales. Finally, business sentiment deteriorated to a four-month low.
From Australia we had March housing finance bouncing back as price rises and recovery signs are seen in the sector. The Australian popped somewhat on the news, although the US dollar was largely lower on the day already.
In central bank news the Reserve Bank of Australia published its latest Statement on Monetary Policy (SoMP). Growth forecasts were downgraded. The bank left unchanged its forecast that inflation would return to the upper band of its target band in 2025.
Confusingly, while the RBA cited its alertness to higher wage growth in its rate hike decision back on Tuesday its SoMP forecasts for wages were downgraded and said, “expectations for wages growth in the next 12 months have moderated”.
