Chinese Manufacturing PMI Hits 3-Year Lows

0 224

The Chinese Caixin/Markit Manufacturing PMI printed its third consecutive negative month in February at 49.9. Once again, this highlighted the damaging impact of the US/China trade war. Although negative, it was slightly better than the 48.5 the market was looking for.

The indicator is the result of a private survey of smaller businesses. It’s also a closely watched reading of economic activity in the world’s second-largest economy. A reading below 50 indicates that the sector is in contractionary territory, where it has been for three months now.

Trading the news requires access to extensive market research - and that's what we do best. Open your Orbex account now.

Official PMI Also Weak

The data came just after the release of the official Chinese PMI data for February. This also showed manufacturing languishing in contractionary territory for a third consecutive month. At 49.2, the reading was also lower than the prior month’s 49.5 reading, hitting a three-year low.

With economic data continues to point to the negative impact of the trade war. And businesses and consumers alike will be hoping that the US and China can come to an official agreement which will put an end to the tit-for-tat tariffs seen over the last year.

US tariffs on $200 billion worth of Chinese goods were set to increase from 10% to 25% on March 1st. However, based on the strength of negotiations, Trump decided to postpone this deadline to allow for further talks. The manufacturing sector will warmly welcome such news, as it is hoping for an end to the tariffs which have so clearly harmed it.

Trump the Negotiator

This spirit of negotiation seems to be the flavor of the month for the Trump administration. The President is currently locked in talks with North Korea over demilitarisation.

Trump held another historic meeting with North Korean leader Kim Jong Un this week in Vietnam. While talks were abandoned without reaching an agreement, the president remains optimistic about the nature of his relationship with Kim and the future of their negotiations.

However, Trump is in a difficult spot here. Both sides will closely watch his negotiations. If he were to be perceived as being too lenient or giving too much away, this could impact the nature of negotiations with his other opponents.

Trump’s own party criticized him for postponing the deadline on the US/China trade talks. They saw this as a loss of leverage and a sign of diminished conviction. In fact, this will have undoubtedly played into Kim’s demands that the US drop all sanctions in return for the abolishing of a key nuclear development site.

Similarly, if Trump is too soft with Kim,  President Xi  is likely to try exploit this in the US/China trade negotiations.

Technical Perspective

usdcnh

USDCNH continues to trend lower within the bearish channel which has framed price action over the last five months. Price is currently challenging the 6.69337 support. If broken, we should see a deeper move down into the bottom of the channel. Above here, resistance is at the 6.73407 level with the channel top just above.

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss

Leave A Reply

Your email address will not be published.