Australian Dollar depreciates amid weaker China GDP
- The Australian Dollar could lose ground due to weaker-than-expected GDP data from China.
- China’s GDP (YoY) grew 4.7% in Q2, compared to the previous expansion of 5.3% and expected 5.1%.
- The US Dollar improves due to improved risk aversion following the attempted assassination of former US President Trump on Saturday.
The Australian Dollar (AUD) edges lower on Monday, trading around its six-month high of 0.6798 recorded on Thursday. In China, a close trade partner of Australia, Gross Domestic Product (GDP) grew 4.7% year-over-year in the second quarter, compared to a 5.3% expansion in the first quarter and an expected 5.1%. Weaker-than-expected China GDP data could exert mild pressure on the Aussie Dollar, undermining the AUD/USD pair.
The Australian Dollar may continue to rise as speculation grows that the Reserve Bank of Australia (RBA) might delay joining the global rate-cutting cycle or even raise interest rates again. Persistently high inflation in Australia prompts the RBA to maintain a hawkish stance.
The US Dollar (USD) strengthens due to increased risk aversion following an attempted assassination of former US President Donald Trump on Saturday. Analysts suggest that if this incident boosts Trump's election prospects, it could lead to so-called 'Trump-victory trades,' potentially resulting in a stronger US Dollar and a steeper US Treasury yield curve, per Reuters.
The AUD/USD pair may find support as the US Dollar (USD) could lose ground due to rising expectations of a potential Federal Reserve (Fed) rate cut in September. This anticipation is driven by the softer-than-expected US Consumer Price Index (CPI) data in June.
Daily Digest Market Movers: Australian Dollar declines due to risk aversion
- China's Retail Sales (YoY) increased by 2.0% in June, falling short of the expected 3.3% and below May's 3.7%. Meanwhile, the country's Industrial Production for the same period showed a growth rate of 5.3% year-over-year, surpassing estimates of 5.0%, albeit slightly lower than May's 5.6%.
- The US Core Producer Price Index (PPI) rose 3.0% year-over-year in June, exceeding the expected 2.5% and the previous reading of 2.6%. Moreover, the preliminary Michigan Consumer Sentiment Index fell short of expectations in July, registering at 66.0 compared to the forecasted 68.5 and the previous 68.2.
- On Friday, China’s Trade Balance data for June, showed a trade surplus of $99.05 billion, widening from the previous figure of $82.62 billion. China Exports (YoY) rose 8.6% vs. 8.0% expected and prior 7.6% reading. Meanwhile, Imports (YoY) declined by 2.3% compared to the previous rise of 2.8%.
- Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday that the US economy appears to be on track to achieve 2% inflation. This suggests Goolsbee is gaining confidence that the time for cutting interest rates may soon be approaching. He also stated "My view is, this is what the path to 2% looks like," according to Reuters.
- On Thursday, the data showed that the US Core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose by 3.3% year-over-year in June, compared to May's increase of 3.4% and the same expectation. Meanwhile, the core CPI increased by 0.1% month-over-month, against the expected and prior reading of 0.2%.
- Federal Reserve Chairman Jerome Powell highlighted the urgent need to monitor the deteriorating labor market on Wednesday. Additionally, Powell expressed confidence in the downward trend of inflation, following his earlier remarks that emphasized the necessity of further data to strengthen confidence in the inflation outlook.
Technical Analysis: Australian Dollar holds position above 0.6750
The Australian Dollar trades around 0.6760 on Monday. The analysis of the daily chart shows that the AUD/USD pair consolidates within an ascending channel, indicating a bullish bias. Additionally, the 14-day Relative Strength Index (RSI) has retreated from the 70 level, suggesting a correction. However, it remains above 50, suggesting continued bullish momentum. A further decline could weaken this trend.
The AUD/USD pair may retest the upper boundary of the ascending channel near the psychological level of 0.6800.
On the downside, immediate support appears around the nine-day Exponential Moving Average (EMA) at 0.6643. Further support is seen near the lower boundary of the ascending channel at 0.6690. A break below this level could push the AUD/USD pair toward the throwback support at 0.6590.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.16% | -0.05% | 0.05% | 0.16% | 0.20% | 0.16% | |
| EUR | -0.17% | 0.03% | -0.02% | 0.09% | 0.03% | 0.23% | 0.19% | |
| GBP | -0.16% | -0.03% | 0.04% | 0.05% | -0.00% | 0.15% | 0.16% | |
| JPY | 0.05% | 0.02% | -0.04% | 0.10% | -0.01% | 0.22% | 0.03% | |
| CAD | -0.05% | -0.09% | -0.05% | -0.10% | 0.03% | 0.15% | 0.11% | |
| AUD | -0.16% | -0.03% | 0.00% | 0.01% | -0.03% | 0.21% | 0.17% | |
| NZD | -0.20% | -0.23% | -0.15% | -0.22% | -0.15% | -0.21% | -0.05% | |
| CHF | -0.16% | -0.19% | -0.16% | -0.03% | -0.11% | -0.17% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.