AUSTRALIAN DOLLAR, CHINA TRADE DATA,TALKING POINTS:
- China’s trade surplus expanded ahead of expectations in June
- However both exports and imports were weaker than forecast
- The Australian Dollar seems more focused on trade headlines than data, however
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The Australian Dollar was steady Friday as official Chinese trade balance data came in ahead of expectations, even though both exports and imports missed forecasts. Its lack of movement suggested perhaps that markets remain more interested in global trade’s clouded future rather than its recent past.
June’s overall balance in US Dollar terms was $41.6 billion, well above both the $27.6 billion expected and May’s 24.9 billion. The Yuan-terms balance was CNY187 billion but, within that, exports grew by 3.1% on the year – well below the 4% growth markets were looking for. Imports rose by 6%, less than half the forecast 12.6% rise and hugely less than May’s 15.6%.
Exports to the US rose by an annualized 5.7% in the first half of 2018 according to the figures, with imports from the US rising by 4%.
The Australian Dollar often acts as the markets’ favored liquid China proxy because of Australia’s huge raw-material export links with China. Indeed the currency has been hit in recent weeks by almost every announcement of US tariffs against Chinese imports, and by Chinese promises of retaliation.
It didn’t move much in the wake of these figures, however, suggesting that tariff headlines are more important for markets now than actual trade data which necessarily comes with a bit of a lag. However, news of another big overall surplus is hardly likely to make the Donald Trump White House back down from its view that China/US trade needs to be rebalanced.
On its daily chart, AUD/USD remains all-too-obviously in the downtrend which has dominated trade for most of 2018, as the interest rate gap between Australia and the US has moved into the latter’s clear favour.
However, while that overall backdrop looks set to be in place for months to come, the Australian Dollar seems to be building some sort of base around the lows of late June. A brief foray higher above that range has been stymied, but the range lows may well hold for a while yet, especially if global risk appetite can hold up.
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— Written by David Cottle, DailyFX Research
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