There is a concern that the recent improvement in the latest Chinese data could well have been a false dawn, and the recent April manufacturing PMI data would appear to reinforce that with this morning the latest Caixin manufacturing data for April showing a slow down to 49.4 from 49.7, following on from the official numbers at the weekend which slipped back to 50.1. With services also softening a little in April this could well be bad news for the commodity currencies which have seen a bit of a rebound of late.
This rebound has caused a few concerns at the Reserve Bank of Australia which has seen the Aussie dollar jump higher in recent weeks and the subsequent slip back into deflation last week appears to have prompted the Australian central bank to cut rates further to a record low of 1.75% in response. While this was predicted in a number of circles the slide back into deflation is not too surprising given the recent declines in commodity prices in Q1. It also ignores the fact that these same prices have rebounded, which means that this may well have been a temporary phenomenon.