AUD holding steady after China data

AUD/USD reclaimed the 0.9400 handle and has been in focus today on the back of some local and regional data.

AUD notes
Source: Bloomberg

While data was limited in US trade, the main takeaway was some fairly dovish comments by Fed members. Lacker said GDP is more likely to be 2-2.5% as opposed to north of 3% while Kocherlakota said a return to 2% inflation could take a long time. Perhaps the FOMC meeting minutes later today will give further insight on what to expect.

These comments saw the greenback lose a bit of ground and aided AUD/USD gains. However, the price action remains choppy with uncertainty driven my mixed China data as well as some event risk for the rest of the region.

Mixed economic readings

In today’s Asian session, focus switched to China’s CPI and PPI data at 11.30am (AEST). The June CPI came in at a slightly weaker than expected 2.3% rise (2.4% expected). PPI was also a bit sluggish at -1.1% and these readings contributed to taking the steam out of the risk rally.

With inflation still near December 2012 lows, it’s clear the economy still has a long way to recover. Tomorrow we have China’s trade balance which is expected to show a good recovery in exports and imports. Should this data meet expectations, then there is a good chance we’ll see the AUD extend its gains in the near term.

In Australia, Westpac consumer sentiment showed signs of improvement with a 1.9% rise and this followed on from some good signs seen in ANZ job ads, Nab business confidence and conditions. Tomorrow’s jobs numbers will be an interesting one as analysts remain split on the shape of the jobs market.

Click to enlarge

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.