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Australian Dollar, Chinese Retail Sales, Industrial Production Data Talking Points:

  • Chinese industrial production rose by 4.8% last month, well below the 6% rise expected
  • Retail sales also came in below estimates
  • Economists have been perhaps a little optimistic about China’s resilience to global deceleration

Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. We’d love to have you along.

The Australian Dollar reverted to its sometime role as the markets’ favorite liquid China proxy on Wednesday and was duly hit, if not for very long, by a triple dose of weak official data out of the world’s second largest economy.

July’s industrial production rose by an annualized 4.8%, well below the 6% expected and June’s 6.3% gain. Retail sales rose 7.6%, below the 8.6% hoped for, while fixed asset investment came in at 5.7%, admittedly only just under the forecast 5.8% gain.

There had been a sense of hope in the market that China was weathering trade storms with the US rather better than might have been expected. These numbers don’t exactly disprove that thesis but do suggest that at the very least forecasters had become a little too optimistic about the country’s economic resilience.

AUDUSD went sharply lower on the data release, but its falls were soon arrested with focus likely more on events in Hong Kong where political unrest and Beijing’s response to it continue to pinion investor attentions during Asia Pacific trading hours.

Australian Dollar Vs US Dollar, 5-Minute Chart

On its daily chart the Australian Dollar remains close to the eleven-year lows plumbed earlier this month. A clear confluence of negatives continues to plague the currency. General risk aversion and worries about global growth create a toxic backdrop for the pro-cyclical Aussie but there are some worrying specifics in the mix too.

The Reserve Bank of New Zealand’s surprise chunky half-percentage-point interest rate cut earlier this month saw investors price in similarly-sized reductions in Australia, when before only a single further reduction was confidently discounted.

Given this it’s no wonder that the Aussie should be under strain, as it clearly is.

Australian Dollar Vs US Dollar, Daily Chart

Any sign that Beijing and Washington are getting closer on trade could see things perk up for Aussie bulls, as could continued strength in Australia’s resilient labor market. The Reserve Bank of Australia is known to be watching metrics connected to that very closely.

However, for as long as the currency is perceived to suffer from such a complete lack of domestic monetary support it will be very hard to get bullish on it for long.

Australian Dollar Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!