The purchasing managers’ index (PMI) for China’s manufacturing sector unexpectedly dropped to 49.2 in October from 49.6 booked in September, the latest data published by the National Bureau of Statistics (NBS) showed Saturday.

The actual data missed the consensus estimate of 49.7 by a small margin. 

Meanwhile, the Non-Manufacturing PMI fell to 52.4 in the reported month from September’s reading of 53.2 and against the expectations of 52.9.

A reading above 50 indicates expansion, while a reading below suggests contraction.

Implications for AUD/USD

Disappointing Chinese NBS PMIs could exacerbate the pain in the aussie dollar, as AUD/USD could risk a fall below 0.7500 in the big week ahead. The RBA and Fed monetary policy decisions highlight the first week of November, with Friday likely to see the critical US NFP release.

On Friday, the aussie corrected sharply from three-month peaks of 0.7556 and tested the 0.7500 barrier before rebounding modestly to finish the week at 0.7523, down 0.28% on the day.

Read: AUD/USD Weekly Forecast: The RBA and the Fed coming with surprises under their sleeves

Iraqi Minister Ihsan Abdul Jabbar said late Saturday, OPEC and its allies (OPEC+) will be able to meet the oil demand by its planned increase to the monthly oil output, per Bloomberg.

Key quotes

“Rising prices for natural gas and coal in Asia and Europe could lead to a rise in oil demand this winter.”

“Monthly increases of 400,000 barrels a day will eventually help stabilize the oil market.”

His comments come days ahead of the OPEC+ meeting scheduled on November 4.

Related reads

  • OPEC+ cuts 2022 oil demand growth forecast slightly to 5.7M bpd – Reuters
  • WTI fades bounce off two-week low amid mixed concerns

Amidst the last-ditch talks held between the UK and France to resolve the dispute over the fishing licenses and checks, French President Emmanuel Macron, who will meet the UK Prime Minister Johnson at the G20 meeting in Rome on Sunday, said the row was “a test” of the UK’s “credibility”, in a Financial Times (FT) interview.

On the other hand, PM Johnson urged the British fishermen to “be confident about going about their lawful business” as he promised action against any infringements on their right to fish.

Meanwhile, the head of the French ports of Calais and Boulogne, Jean-Marc Puissesseau warned, “It will be a drama, it will be a disaster. It will be chaos in your country because the trucks will not cross, it will be chaos at the ports. It has reached a ridiculous point, I would say.”

FX implications

Amid renewed Brexit concerns and pre-BOE caution trading, a potential recovery in GBP/USD from Friday’s massive sell-off is likely to remain shallow.

The cable tumbled 0.80% on the day to hit two-week lows of 1.3668 last Friday, settling the week at 1.3678. The steep drop could be attributed to the month-end flows into the US dollar, lifting the buck from four-week troughs.

Read: GBP/USD Weekly Forecast: Duo of central banks and Nonfarm Payrolls promise wild action

The US Federal Reserve (Fed) is expected to raise its benchmark interest rates in July 2022 to counter the risks of rising inflationary pressures, Bloomberg reports, citing comments from Goldman Sachs economists led by Jan Hatzius.

Key quotes

“The Fed will raise its benchmark from a range of zero to 0.25% soon after it stops tapering its massive asset-purchase program.”

“A second increase will follow in November 2022 and the central bank will then raise rates two times a year after that.”

“The main reason for their new forecast was they now expect inflation to prove more stubborn than they previously thought.”

“Expect consumer price inflation outside of food and energy costs to still be above 4% when the taper ends.”

“We think this will make a seamless move from tapering to rate hikes the path of least resistance.”

“With inflation far above target and job availability high, officials will likely conclude most of any remaining labor force weakness is structural or voluntary.”

Related reads

  • US inflation reaches a new 30-year high in September as economic growth fades
  • Gold Weekly Forecast: XAU/USD’s drop below $1,780 an ominous sign ahead of Fed