THE TAKEAWAY:Chinese exports decline 3.1% year-over-year > Economic slowdown weighs on Australian exporters > May support RBA rate cut possibility > AUD/USD Falls
The Australian Dollar fell against the US Dollar after Chinese exports declined 3.1 percent year-over-year in June when Bloomberg-surveyed economists expected a 3.7 percent growth. This data marks the greatest decline since November 2009. After the release, China customs spokesman Zheng commented on trade challenges ahead fueled by a slowdown in industrial output.
As Australia’s largest trading partner, weak economic activity in China will likely reduce demand for raw materials, which puts pressure on Australian exporters. This stress on the Australian economy might compel the Reserve Bank of Australia to reduce its interest rate to promote economic growth. Credit Suisse’s gauge for market priced-in outlook rose 6 percent after the release, showing investors now expect a 61 percent chance of a rate cut by the RBA. A rate reduction by the central bank could reduce the appeal of the Aussie to yield-seeking investors thereby moving AUD/USD lower.
AUD/USD (5-Minute Chart)
Source: FXCM Marketscope
—Jimmy Yang, DailyFX Research Team
