The China RatingDog Services PMI dropped slightly from 52.1 to 52 in December. This change might affect China’s economic outlook, especially with global economic pressures and ongoing geopolitical issues. Traders and analysts closely monitor these PMI fluctuations to gauge market trends. Any shifts in currency pairs related to China’s economy can help us understand broader economic patterns.

Slowing Economic Momentum

The decline in China’s December 2025 Services PMI, while still indicating growth, shows that economic momentum is slowing as we approach the new year. This suggests that consumer and business activity is weakening, which may pose challenges for growth in the first quarter of 2026. As a result, we recommend taking a more cautious or bearish approach on assets tied to Chinese demand. In light of this data, we suggest buying put options on the Australian Dollar against the US Dollar (AUD/USD). Australia’s economy relies heavily on Chinese demand for raw materials, so a slowdown in China often leads to a weaker Aussie dollar. This strategy allows us to profit from a potential downturn while limiting our risk to the premium paid for the options. Recent data from late 2025 backs this cautious view, as China’s industrial production appears to be peaking. Iron ore prices have already dropped by 3% last week, falling below $130 per tonne for the first time since October 2025. This trend supports the idea of shorting commodity futures or stocks of major mining companies.

Dovish Signals From Chinese Officials

Looking back to a similar downturn in early 2024, we noticed that declining PMI figures preceded an unexpected rate cut by the People’s Bank of China. Therefore, it is wise to keep an eye out for dovish signals from Chinese officials, as these could influence the yuan. One strategy could involve selling yuan forward contracts expectantly for further monetary easing. The weakening service sector also impacts global luxury brands and tech companies with significant ties to Chinese consumers. We can use this information to buy puts on specific company stocks or sector-specific ETFs, hedging against potentially disappointing earnings reports expected later this month. Create your live VT Markets account and start trading now.

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