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Talking Points:

  • Australian Dollar depreciates despite solid Chinese second quarter GDP
  • Weaker industrial production amidst US Chinese import tariffs hurt AUD
  • China’s NBS does see more external uncertainties for the economy ahead

Find out what retail traders’ Australian Dollar buy and sell decisions say about the coming price trend!

The Australian Dollar depreciated against its major counterparts despite some relatively solid Chinese second quarter growth statistics. China’s economy expanded 6.7% y/y which was in line with expectations and slower than the 6.8% growth seen in the first quarter. Quarter-over-quarter, China’s GDP was 1.8%. This was better than the +1.6% estimate and up from 1.4% prior.

Overall, these economic growth statistics were largely as expected and nothing extraordinary out of the realm of possibilities. Yet, what could have caused some weakness in the Aussie Dollar? And for that matter, the New Zealand Dollar as well? Look no further more than the industrial production figures which also crossed the wires simultaneously with the GDP data.

In June, Chinese industrial production increased only 6.0% y/y versus 6.5% anticipated and 6.8% in May. That was the weakest outcome since March and continues a trend of slowing expansion since April. Perhaps the tariffs US applied on China could be having some effects here. In fact, accompanying the slew of data were some comments from the National Bureau of Statistics of China.

According to the agency, it forecasted more external uncertainties for the economy adding that China faced ‘extremely complicated, grim’ conditions in the first half of this year. All of this could bode ill for the Aussie Dollar. China is Australia’s largest trading partner and economic performance in the former often implies knock-on effects for the latter.

BACKGROUND: A Brief History of Trade Wars, 1900-Present

The sentiment-sensitive Aussie Dollar was paring some earlier gains when Asian benchmark equities initially headed higher after market open as expected. However, this trading dynamic quickly reversed course with the Chinese data helping to pare AUD’s gains. Ahead, keep an eye out for any updates on the US/China tariff situation. Signs that more levies are on their way are likely to dampen sentiment and vice versa.

We just released our 3Q forecasts for currencies like the US Dollar in the DailyFX Trading Guides page

Australian Dollar Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter