As the dollar has gained strength in recent weeks, commodity currencies have been among the hardest hit. The recent flare-up in tensions between the US and Iran over the weekend has increased demand for safe-haven assets amid global uncertainty. Upcoming data could reassure markets and allow commodity currencies to rebound. But if the data disappoints, the current trends could deepen.
The PMI readings for China are particularly important in this context because they provide the latest data from the world’s largest raw materials consumer. They can also offer insight into the global economy. If Chinese factories raise prices due to energy constraints, this could signal second-round inflation effects and keep CPI pressures elevated in other economies.
The Big Names Vs the Agile Exporters
Traders will also compare the differences between the NBS (official) and RatingDog (former Caixin, private) PMIs. The government survey covers larger companies that import most of the raw materials, making it more relevant for the AUD. The impact on the CAD could remain limited because China has dramatically reduced fuel imports during the Middle East crisis and is using its reserves to preserve competitiveness.
The private survey tracks a broader group of smaller, export-oriented companies. These firms are generally more agile and can adapt faster to changing conditions. Their results could have a greater impact on currencies such as the dollar, the euro, and even gold because they may reveal whether China is exporting inflation through higher energy costs.
What Markets Are Looking For
Overall, readings above 50 indicate expansion. Traders will look for stronger numbers to confirm accelerating growth, which would generally support commodity currencies. Lower readings that remain above 50 could trigger only a limited market reaction. However, if either or both PMIs fall below 50 into contraction, commodity currencies could underperform.
Tuesday’s China NBS Manufacturing PMI is expected to rebound to 50.3 from 50.0. The General PMI is forecast to rise to 50.7 from 50.5. Although both remain in expansion territory, they sit close to the dividing line. Stronger-than-expected results could improve market sentiment. However, it would take only a small downside surprise to disappoint markets.
When Will Imports Recover?
The more export-oriented Chinese RatingDog Manufacturing PMI will be released on Wednesday. Economists expect it to ease slightly to 51.4 from 51.8. Traders will closely watch the prices paid component to see whether Chinese exporters are raising prices and whether those increases will spread through the global economy.
Recent data show strong export performance in China but weaker import growth because industrial demand and domestic consumption have slowed. A rebound in the PMIs could signal that the economy is recovering from the war shock and could support commodity currencies.
