Aussie steady as China growth slows

By Andrew Robinson, Senior Market Analyst at MarketPulse

AUD/USD holds near 10-day highs

The AUD/USD FX pair held steady near 10-day highs after the Chinese economy showed signs of slowing in the second quarter. Q2 growth was 6.2% y/y, a slowdown from Q1’s 6.4% and the lowest growth recorded in 27 years as the impact of the US-China trade war increased.

In comments after the data release, China’s National Bureau of Statistics admitted that China “faces more external uncertainties an instabilities while the domestic economy faces new downward pressure”. For the first half of the year, capital formation made up 19.2% of GDP growth while net exports reached 20.7%.

AUD/USD Daily Chart

Source: OANDA fxTrade

Other data beat forecasts

In other data released today, industrial production rose 6.3% y/y in June, beating estimates of a 5.2% gain and the fastest expansion in three months. Retail sales also came in better than expected, rising 9.8% y/y, which was the biggest gain since March 2018, and accelerating from May’s 8.6% while also beating forecasts of an 8.3% increase. Fixed asset investment also showed an upturn with a 5.8% y/y increase year-to-date, an increase from 5.6% posted in May.

Latest RRR cut implemented

In other China-related news, the central bank implemented its third phase of cuts to the Reserve Ratio Requirement which was announced on May 6. It is estimated that the cut would free up about 100 billion yuan of previously tied up capital. The first phase took place on May 15, the second on June 16 and the third one today, releasing a total of 300 billion yuan of liquidity.

USD/CNH has traded modestly today, holding just below the 55-day moving average at 6.8858 while being confined to a broader 6.84-6.80 range for the past month.

USD/CNH Daily Chart

Source: OANDA fxTrade

Slow data calendar for the rest of today

There are no data releases scheduled for the European session and for the North American session there is only the Empire State manufacturing index for July on tap. That is expected to rebound from -8.6 in June to +0.5.

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