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Downbeat data printed from China over the weekend led to a weak start for the Aussie and Kiwi but risk appetite eventually allowed them to recover.

  • Chinese official manufacturing PMI down from 51.8 to 51.2 in April
  • Chinese official non-manu PMI down from 55.1 to 54.0 in April
  • Australia AIG manufacturing index up from 57.5 to 59.2
  • Australia’s MI inflation gauge increased from 0.1% to 0.5%
  • Japanese final manufacturing PMI downgraded from 52.8 to 52.7

Major Events:

Weak Chinese PMI

Over the weekend, the world’s second largest economy printed its manufacturing and non-manufacturing PMIs for the month of April and yielded downbeat results, signaling a potential slowdown in global demand.

The manufacturing index dropped from 51.8 to 51.2 instead of merely dipping to the projected 51.7 reading to reflect a much slower pace of industry growth than expected. Meanwhile, the non-manufacturing index slipped from 55.1 to 54.0 to indicate weaker growth in the sector as well.

Components of the report indicated that the drop was mostly due to lower commodity prices for the month, leading some analysts to predict that Chinese economic performance may have already peaked for the time being. Survey results revealed that production remains robust but that indicators for employment, new orders, and output have declined.

U.S. government agrees on spending package

Shutdown averted! U.S. lawmakers finally agreed on a spending package until the end of September that would prevent the federal government from shutting down later this week. Phew!

This $1 trillion spending package involves $12.5 billion in new military spending and an additional $1.5 billion for increased border security as requested by Republicans. What it doesn’t include is Trump’s demand to include funding for his border wall.

Members of Congress are still set to vote on this agreement, but there’s a strong likelihood that it will be passed. After all, Democrats seem pretty happy with the exclusion of policy measures that would have cut environmental funding and Wall Street regulation.

Market Movers:

JPY

The Japanese currency gave up ground to its peers, not just because of the slight downgrade in the final manufacturing PMI, but also due to the pickup in U.S. dollar demand and risk-taking.

USD/JPY advanced from 111.29 to 111.68, AUD/JPY is up from 83.37 to a high of 83.63, EUR/JPY is up from 121.45 to a high of 121.73, and GBP/JPY climbed from 144.17 to a high of 144.27.

Watch Out For:

  • Most European banks closed for the holiday
  • 8:15 am GMT: Swiss retail sales y/y (0.5% expected, 0.6% previous)