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The Aussie dollar has kicked off the week on a negative note with price action making a convincing break to the downside of 106 US cents. The local unit began its descent in anticipation to Chinese PMI data and has remained on a downward trajectory in the ensuing period of the release. The HSBC Chinese purchasing Managers Index showed further contraction of the Chinese manufacturing sector with the index recording a drop to 51.1 in May from a previous level of 51.8. This has induced the typical 'hard-landing' debate with investors pondering the potential repercussion in the event of a sustained slowing of the world's second largest economy.
With little in the way of top tier economic feedback locally this week, we can expect the local unit to be at the mercy of risk trends abroad - although we're likely to see rates conjecture continue to impact the local unit to a smaller degree - particularly surrounding a speech by deputy RBA Governor Ric Battellino on Thursday. Key data from the US will see the release of 1Q GDP which is expected to show the economy grew at an annual pace of 2.8 percent from a previous 1.8 percent. Data on US housing, personal income/spending and durable goods orders should also prove to shape broader market sentiment. At the time of writing the Aussie dollar is buying 105.65 US cents.
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Across the Atlantic the theme of Euro-zone peripheral debt woes have continued to impact global sentiment. Global markets capped of the week on a negative note on Friday amid further concerns that Greece is falling further to the edge of economic collapse. In recent times we've started to hear the initial murmurings of a possible "soft restructure" or "re-profiling" as so carefully put by Luxembourg Prime minister Jean-Claude Juncker.
Although initially rejected by some European officials, the prospect of a restructuring of debt in some way, shape or form appears to be inevitable. It appears we're seeing a shift in sentiment towards a "soft restructure" from some European officials, with comments by French Finance minister Christine Lagarde on Friday suggesting France may support some re-profiling measures.
Although she clearly stated "there won't be is a restructuring of Greek debt" Lagarde also appears to be warming to restructuring measures such a voluntary extension of maturing debt stating "We would accept anything that is based on a voluntary accommodation by banks." At the time of writing the Euro is buying US$1.4070.
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