Australian Dollar Rises After Strong China Manufacturing PMI Data

The Australian dollar strengthened against other major currencies in the Asian session on Thursday, following the release of China's manufacturing activity that expanded for the first time in three months in May, as strong new orders boosted production.

Data from from S&P Global showed that the China Caixin manufacturing Purchasing Managers' Index picked up to 50.9 in May from 49.5 in April. The reading was forecast to remain unchanged at 49.5.

The latest reading was above the neutral 50.0 level, suggesting the first improvement in the health of the manufacturing sector since February. Moreover, this was stronger than the post-pandemic average.

Investor sentiment boosted after the passage of the U.S. debt ceiling bill by the U.S. House of Representatives by a wide margin. The U.S. Senate must vote on the bill later this week before U.S. President Joe Biden can sign it into law to avoid a potentially disastrous default.

In economic news, the manufacturing sector in Australia continued to contract in May, albeit at a slower rate, the latest survey from Judo Bank revealed on Thursday with a manufacturing PMI score of 48.4. That's up from 48.0, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. In the Asian trading today, the Australian dollar rose to nearly a 5-week high of 1.0844 against the NZ dollar and a 2-day high of 1.6397 against the euro, from yesterday's closing quotes of 1.0788 and 1.6433, respectively. If the aussie extends its uptrend, it is likely to find resistance around 1.10 against the kiwi and 1.58 against the euro.

Against the U.S. and the Canadian dollars, the aussie advanced to 0.6518 and 0.8841 from yesterday's closing quotes of 0.6502 and 0.8822, respectively. The aussie may test resistance around 0.67 against the greenback and 0.91 against the loonie.

The aussie edged up to 90.93 against the yen, from yesterday's closing value of 90.59. On the upside, 95.00 is seen as the next resistance level for the aussie.

In economic news, the manufacturing sector in Japan climbed back into expansion territory in May, the latest survey from Jibun Bank, with a manufacturing PMI score of 50.6. That's up from 49.5, and it moves above the boom-or-bust line of 50 that separates expansion from contraction.

Looking ahead, PMI reports from U.K. and European countries for May, U.K mortgage approvals data for April, Eurozone flash inflation rate for May and unemployment rate for April are due to be released in the European session.

At 5:30 am ET, the President of the European Central Bank Christine Lagarde will deliver a speech at 27th German Savings Banks Conference 2023 "Because it's about more than money" in Hannover, Germany.

At 7.30 am ET, the European Central Bank is set to issue the account of the monetary policy meeting of the Governing Council held on May 3 and 4.

In the New York session, U.S. weekly jobless claims data, PMI reports from U.S. and Canada for May, U.S. construction spending for April and U.S. EIA crude oil report are slated for release.

At 8:45 am ET, the chair of the Supervisory Board of ECB Andrea Enria will deliver a keynote speech at the 22nd Annual International Conference on Policy Challenges for the Financial Sector organised by the World Bank, International Monetary Fund and Federal Reserve System in Washington, D.C, U.S.

At 1:00 pm ET, Federal Reserve Bank of Philadelphia President Patrick Harker will deliver a speech on the economic outlook before virtual NABE Monetary Policy and Outlook Webinar, at Philadelphia, U.S.

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