Australian Dollar Mute As Manufacturing Index Shows Contraction

By Eric Andersen,

THE TAKEAWAY : Aussie Manufacturing Performance Index Falls to 43.9 from 49.5 > Market Largely Unresponsive as Traders Wait on RBA Rate Decision > AUDUSD Falls, but Quickly Recovers

Data released by the Australian Industry G ro u p showed a decline in the manufacturing performance index from 49.5 to 43.9 in April. The lower figure indicated a contraction in the Aussie manufacturing sector and nears the index’s two-year low of 42.3.

The market’s response was muted as traders await, first, the results of the Chinese Purchasing Manager Index and, second, the Reserve Bank of Australia (RBA) rate decision . Both figures are due out in a few hours . The latter figure, the RBA cash rate decision, is the major market mover over the next few hours, and AUDUSD will likely see a lot of activity if the RBA board surprises traders by holding the figure constant at 4.25 percent. Currently, analysts overwhelmingly expect an interest rate cut of 25 basis points to 4.00 percent.

In the minutes following the performance of manufacturing index release, the AUDUSD currency pair suffered a small drop from 1.0420 to 1.0418, but quickly recovered.
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