Talking Points
- The Australian Dollar got a boost from China’s Wednesday data deluge
- Much came in as expected but the big one, industrial production, had a little more vigor
- It only bear forecasts by a tick though
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The Australian Dollar gained slightly following the release of stronger-than-expected Chinese industrial data.
Production rose by 6.5% on the year in May, according to official figures. That was (just) better than the 6.4% rise expected and exactly the same as April’s rise. The statistics bureau was modestly upbeat too, suggesting that the data point to continued stabilization of the economy and improving momentum.
Figures released simultaneously showed that retail sales were up exactly as expected, rising 10.7% on-year in May. Again, this was precisely the same as prior-month’s gain. Lastly fixed-asset investment was revealed to have gained 8.6%. That was a couple of ticks below market expectations but still reasonably sturdy.
The AUD/USD pair got a little lift after this Chinese data deluge. The morning’s action has proven once again that the Aussie is slightly more likely to react to Chinese numbers than to local ones. An earlier, gloomy, consumer confidence snapshot barely caused a twitch.
This may be because the Reserve Bank of Australia has placed such emphasis on external factors (such as China’s economic performance) when it comes to setting monetary policy. Nevertheless, Australian futures markets see no increase for record-low Australian interest rates this year.
Market focus is naturally overwhelmingly on the US Federal Reserve and its June monetary policy meeting. That wraps up long after Asia/Pacific markets will have called it quits for Wednesday. Chair Janet Yellen and her Federal Open Market Committee colleagues are widely expected to add another quarter percentage point to US rates. This would further erode the Aussie’s yield advantage over its US cousin.
However, this prospect has been extremely well flagged and doesn’t seem to be disturbing the peace of the RBA, so it will be strange if an as-expected hike causes the Australian Dollar to rise much.
Get live coverage of Australia’s official labor-market data release Thursday at the DailyFX webinars
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
