Australian Dollar Steady On Mixed China Data, Employment Up Next
Australian Dollar, China Data, Talking Points:
The Australian Dollar wilted a little on news of disappointing Chinese retail sales
The overall Chinese data picture was quite strong however
The Aussie now looks toward its own key employment figures
Fourth-quarter technical and fundamental forecasts from the DailyFX analysts are out now.
The Australian Dollar initially wilted just a little on Wednesday following a welter of official Chinese economic data that was actually by no means weak. However, investors may have initially focused on retail sales, which were more feeble than expected, only to return to market when they saw the tone of the data overall.
Sales rose by an annualized 8.6% in October. This was a quite robust showing, but some way below the 9.2% level forecast, which had also been September’s rise. Industrial production did better, rising 5.9% on the year. This was only just above the 5.8% expected. Still, in an atmosphere dominated by trade tension with the United States, the data suggests as have other numbers that China’s manufacturing economy is at least holding up.
Fixed asset investment rose 5.7%, above the 5.5% expected.
These numbers won’t do anything to the thesis that China has already seen its best monthly growth levels for 2018, but they do probably keep in on course for the admittedly modest 6.5% overall growth targeted by Beijing.
The Australian Dollar can often act as the foreign exchange market’s favorite liquid China proxy thanks to Australia’s wide trading links to the world’ second largest economy. It did not obviously do so on Wednesday however, with AUD/USD slipping a little after the numbers but recovering quickly enough.
On its broader, daily chart the Aussie has come under some renewed pressure this week against its US cousin, mostly thanks to trade-related swings in global risk appetite. The Australian Dollar usually acts as a ‘risk currency’ – bought when investors are sanguine about growth prospects. These units have tended to lose out in recent sessions to perceived havens such as the US Dollar and Japanese Yen,
Still, AUD/USD has risen in the past two weeks above 2018’s dominant downtrend line, although its tenure there will remain highly dependent on that hair-trigger risk appetite.
In the end the Australian Dollar is still very short of domestic interest rate support. The Reserve Bank of Australia’s Official Cash Rate still languishes at its record low of 1.50%. That has endured since August 2016 and according to futures market pricing is set to remain unchanged all through 2019. If so the contrast between RBA policy and that of a US Federal Reserve still committed to raising rates will make it hard to see AUD/USD making sustainable gains.
The next major hurdle for the Australian currency will be its own domestic employment data release, due Thursday. Job creation has been impressive for years, but one or two voices are now starting to wonder how much longer it can hold up.
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--- Written by David Cottle, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.