The Australian Dollar (AUD) has shown moderate growth, trading above 0.6750, largely due to news surrounding Chinese economic markers. The AUD has remained strong, nearly reaching 0.6770 in the initial Asian session on Monday and continuing this momentum into Tuesday trade. Developments in Sino-Australian trade discussions have also played a part in this growth.
The US Federal Reserve’s Inflation Metric for July reflected a Year-over-Year (YoY) growth of 2.5%, passing the central bank’s target of 2%, which indicates increasing inflationary pressure in the US. However, China’s Manufacturing Purchasing Managers’ Index (PMI) showed a contraction in the manufacturing sector but growth in the service sector.
On Monday, the release of China’s August manufacturing data is eagerly awaited with predictions forecasting an improvement in the manufacturing sector. The AUD/USD demonstrated slight improvements despite retraction from the previous peak last Friday.
Moderate Australian dollar growth amid Chinese economics
Following July’s Personal Consumption Expenses (PCE) Index, the probable strengthening of the US dollar may lead to a fall in AUD/USD. August’s US Non-Farm Payrolls (NFP) data, set for release on Friday, will be closely monitored as it may inform us about potential shifts in US interest rate reductions and consequently, AUD/USD’s current trend.
The US Bureau of Economic Analysis reported that the PCE Price Index for July rose 2.5% YoY, just shy of the predicted 2.6%. Additionally, the US Gross Domestic Product (GDP) in Q2 grew by 6.6%, missing the forecasted growth of 6.7%. These indicators reflect a slightly slower economic recovery than expected which policymakers will need to take into account for future strategic decisions.
Andrew Hauser, the RBA’s deputy governor, suggested that Australia won’t follow the Federal Reserve’s interest rate cuts this year, partially due to inflation and a cash rate of 4.35%. The divergence in these monetary policies could affect the exchange rate dynamics and might create pressure in forex markets.
China’s PMI in August showed mixed outcomes and the mismatch could potentially affect the AUD due to Australia’s economic dependence on China. Experts are advising staying alert for future data releases to determine the overall impact on the AUD.
