Commodities Feeling Softer After Weaker Chinese Manufacturing and Services

Risk sentiment has been improving in recent months, after signals from the FED that they will stop raising interest rates further, since they stalled at 5.50%. As a result, the sentiment has been improving, which is pushing risk assets such as stock markets and commodity dollars higher, while the USD has been retreating.

Yesterday the US dollar fell to the day’s lowest levels since early August, following FED’s Mester’s dovish remarks and the Beige Book that revealed a slowdown and disinflation in the US. The fast retreat in the USD in recent weeks shows what markets are thinking about interest rates, with Fed funds futures pricing in 116 bps in rate cuts next year, up from 100 basis points on Monday and 87 basis points at the start of the week.

Besides that, we have been seeing some improvement in the global economy, with Eurozone and UK manufacturing and services PMI reports showing improvement for this month, while the US GDP for Q3 was revised higher yesterday to 5.2%. Today we had the manufacturing and services PMI numbers from China, which were expected to show improvement as well in November, but slowed further.

NZD/USD has turned bullish since October on improving sentiment, pushing above 0.62 yesterday, but it retreated lower and we decided to open a buy NZD/USD signal. However, the slowdown in the PMI numbers is leading to talk of more stimulus from the government, benefiting commodities such as the AUD and the NZD.

China Services and Manufacturing PMI Reports

• November Manufacturing PMI 49.4 points vs 49.7 expected
• Previous manufacturing PMI was 49.5 points
• November Services PMI 50.2 points vs 50.9 expected
• October services PMI was 50.6 points

NZD/USD Live Chart