Australian Dollar Holds Up As China's Industrial Profits Grow
- Chinese industrial profits scored measurable gains in May
- However, the Australian Dollar only twitched higher
- Domestic factors are more likely currency drivers now
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The Australian Dollar remained firm Tuesday on news that Chinese industrial profits did the same.
Official figures showed profits rising 16.7% on the year in May, well above April’s already chunky 14% gain. For the year to date Chinese companies are looking at profit gains of 22% compared with their position in 2017. Petrochemicals and transport were the industry sectors doing best, according to the figures, with power generation lagging.
The Australian Dollar can act as the markets favoured liquid China proxy thanks to its home nation’s famed, vast raw-material export links to the Asian giant. It didn’t obviously do so in this case beyond some small gains, although AUD/USD did post the session’s highs around 0.7585 in the immediate aftermath of the data.
The backdrop for the Australian Dollar remains that current, record-low interest rates are thought unlikely to change this year and possibly well into next. Of course, the Reserve Bank of Australia keeps a close eye on Australia’s export performance. But the tenor of its most recent commentary suggests that domestic factors- notably the labor and housing markets- loom largest in its policy thinking, which may make Chinese data less influential.
However, the currency has been vulnerable to downside Chinese surprises in the recent past, even if stronger numbers don’t always mean big upside moves.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.