On Wednesday (01/March), China's National Bureau of Statistics released their Manufacturing PMI data. It strengthened from 50.1 to 52.6 in February. 

This figure exceeded the market expectations at 50.5. The improvement in China's manufacturing data is inseparable from the support of the New Orders sub-index which is expanding for the first time since July last year. 

This is based on the increasing export demand. In February, the government's economic stabilization policy measures are increasingly showing their effects.

It was coupled with the ever-diminishing impact of the pandemic and other supporting factors. In addition, the company continues to boost production, reflecting china's economy continues to recover.

China’s non-Manufacturing PMI Rose by 1.9

The statement above was said by an NBS senior statistician Zhao Qinghe. Meanwhile, China's Services or Non-Manufacturing PMI also increased from 54.4 to 56.3. 

This reflects the service business in that country has recovered to near pre-pandemic conditions. The removal of strict restrictions by the Chinese government in January brought the positive impact. 

It helps the recovery of business activity and domestic market demand. Production growth was pushed to the highest level since June 2022 after all workers came back to their manufacturer.

Although the Manufacturing and Services PMI has continued to expand in the past two months, some experts are still worried about the foundation of China's economy. 

Analysts: China's Economic Recovery Has Not Been Fully Solid

According to Zhao Qinghe, companies that are still facing a shortage of demand have indeed decreased compared to the previous period. However, weak market demand is still prominent in several sectors. 

A similar opinion was also expressed by Caixin Insight Group's senior economist, Wang Zhe. He said that the economy appears to be improving because it is supported by an increase in market demand.

Some other factors are also supported the economy such as demand from abroad, logistics, and a labor market that is recovering faster. One more thing needs to be known so far. 

However, Wang added that the impact of pandemic at large is still being felt and the economic foundations have not been fully solid. It needs more time to restore production and economic order back to normal

AUD/USD Slipped Below 0.68

AUD/USD was constrained in a two-month low below the 0.6800 threshold since earlier this week. The disappointing release of Australia's Gross Domestic Product (GDP) data this morning further worsened sentiment over the Aussie. 

Recent reports from China, however, excite this pair a bit. The Australian dollar was observed to rise by around 0.5% to a range of 0.6765 against the US dollar at the end of the Asian session on Wednesday.

Australia's GDP report showed 0.5% for Quarter-over-Quarter growth in the fourth quarter of 2022. This figure misses the consensus estimate of 0.8%.

That was also signaling a slowdown compared to 0.7% growth in the previous period. Annual GDP growth through the end of December stood at just 2.7%, in line with consensus expectations. 

RBA Further Rate Hike is Uncertain 

In fact, the previous report recorded an increase of 5.9% for Year-over-Year. This report sparked pessimism ahead of the Policy Meeting of the Reserve Bank of Australia (RBA) on 7 March 2023. 

The Consensus expects the RBA to raise interest rates by another 25 basis points on that occasion. However, the prospect of further hikes is increasingly uncertain.

The RBA has no choice but to raise interest rates further in this situation. However, they are likely to be forced to stop doing so soon if more economic indicators fall out in subsequent reports. 

Australia's recent economic reports have tended to be mixed. Unemployment rates and retail sales both outperformed expectations in January. Consequently, domestic economic data was unable to be a significant positive catalyst for the Aussie.