Australian Dollar Inches Lower After Business Confidence, China CPI

Australian Dollar Talking Points:

  • Australian business confidence was unchanged in June
  • However firms; assessment of current conditions improved
  • Retail continues to lag

Find out what retail foreign exchange traders make of the Australian Dollar’s chances right now at the DailyFX Sentiment Page.

The Australian Dollar didn’t move far on Tuesday following data from both its home country and from China which broadly matched expectations, but it did weaken a little.

Chinese Consumer Price Index rose at an annualized pace of 1.9% in June, exactly as forecast and a nudge faster than May’s 1.8% gain. Producer prices grew at 4.7%, however, outstripping both the 4.5% rise expected and the previous month’s 4.1% gain.

Closer to home, June’s business confidence survey from the National Australia Bank came in at 6, the same as May’s and pretty average by historical standards. The sample’s take on current conditions however rose to 15, from 14 last time around, with strength reportedly spread across almost all industries.

Retail confidence is still lagging however and, with worries about consumption front and center for interest rate setters at the Reserve Bank of Australia, it may have been this information that weighed on the Aussie.

The China data are probably being over ruled by focus on trade. Official data on this from Chinaare due on Friday and they will be closely watched given the heightened tensions between it and the US.

The currency an act as the markets’ favorite liquid China proxy thanks to Australia’s famed raw material export links with the world’s second largest economy.

On its broader, daily chart, AUD/USD remains very clearly in the long downtrend which has dominated trade all year, largely thanks to the clear fact that, while US interest rates are already some way down the rising path, no increase to Australia’s own record-low borrowing costs is foreseen until late 2019 at the very earliest.

However, the Australian Dollar has managed to poke above its previous trading range. That said, however the steep falls seen between June 14 and 19 will probably prove tough ground for the bulls to retake without some major fundamental injection of momentum.

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— Written by David Cottle, DailyFX Research

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