Talking Points

Aussie Dollar Higher After HSBC China PMI Print Tops Forecasts
Euro to Advance if Strong PMIs Weigh Against ECB Easing Bets
US Dollar May Rise if Fed Speakers Imply Mid-2014 QE End-Point

The Australian Dollar outperformed to start the trading week after HSBC reported that its China Manufacturing PMI gauge of factory-sector activity unexpected rose to 51.2 in September, topping forecasts calling for a print at 50.9. China is Australia’s top trading partner and a critical source of demand for the pivotal mining sector. With that in mind, stronger economic news-flow argues against further RBA interest rate cuts, offering support for the currency. Evolving speculation surrounding Federal Reserve monetary policy may disrupt the Aussie’s advance however. Still, we remain long AUD/USD.

The preliminary set of September’s Eurozone PMI figures headlines the calendar in European hours. The region-wide Composite index is expected to show manufacturing- and service-sector growth accelerated to the fastest since June 2011. French and German PMI readings are likewise expected to show improvement. A pickup in economic activity data may be seen as weighing against the probability additional ECB stimulus, boosting the Euro.

Later in the day, the spotlight shifts to the week’s first round of scheduled speeches from Federal Reserve policymakers. New York Fed President Bill Dudley, Atlanta Fed President Dennis Lockhart, and Dallas Fed President Richard Fisher are all set to cross the wires (though only the first of the three is a current member of the FOMC rate-setting committee). Perhaps the most hawkish message that could emerge is that the timeline to wind down QE3 still envisions an end-point in mid-2014. That would imply a faster pace of stimulus removal than if the Fed began to taper asset purchases this month, boosting the US Dollar.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

1:45

CNY

HSBC/Markit Flash Manufacturing PMI (SEP)

51.2

50.9

50.1

Euro Session:

GMT

CCY

EVENT

EXP/ACT

IMPACT