AUD/USD trimmed earlier losses on Chinese PMI

On Thursday Australian dollar managed to pare losses, registered on Wednesday, against the greenback, but was still on negative territory, after the official report on Chinese Purchasing Managers Index.

During earlier Asian session AUD/USD pair fell to a session low at 0.8925, after which consolidation followed at 0.8970. The support level at 0.8999 was obviously breached.

On Thursday the National Bureau of Statistics and China Federation of Logistics and Purchasing reported that Chinese PMI came in at 50.3 in the month of July, exceeding estimates of a value of 49.8, after in June the index stood at 50.1. Values above the 50.0 level indicate expansion in activity. This data caused positive impact on the Aussie, as China is Australias largest export partner.

In addition, today the Housing Industry Association (HIA) said that new home sales in Australia recorded gains by 3.4% in June, after the 1.6% advance during the previous month.

Australian manufacturing sector remained in the contraction zone for the 25th month in July, neutralizing the slight increase in June, according to data by the Australian Industry Group (AIG). Australian PMI showed a reading of 42.0 in July, down from 49.6 in June, as this was the largest drop since April. The index was last in the zone, pointing expansion (above 50.0), during February 2012. Import Price Index in Australia decreased for the first time during the last three quarters in Q2 this year, by 0.3%. This was the largest drop on annual basis since the second quarter of 2010. In the mean time, Export Price Index also declined by 0.3% during Q2 this year, marking its fifth quarterly drop. Preliminary estimates pointed that both indicators will increase during the second quarter of 2013.

At the same time, on Wednesday Reserve Bank of Australia (RBA) Governor Glenn Stevens said that the current inflationary situation in Australia makes room for the central bank to consider additional interest rate cuts from the present record low level of 2.75%. Bloomberg reported that traders saw a 92% probability that RBA will cut its benchmark interest rate following its meeting on August 6th. Previously the estimated chance for such action was 75%.

Elsewhere, the Aussie was trading higher against the Japanese yen, as AUD/JPY added 0.43% to 88.33 at 6:40 GMT. AUD/NZD, on the other hand, was almost unchanged, trading at 1.1258 at 6:42 GMT, inching up 0.01%.