China Sends Strange Signals, Australian Dollar Explodes
The Australian dollar (AUD) strengthened against the US dollar (USD) in Friday's trading, after weakening in the previous session. The AUD/USD pair rebounded following the release of China's Industrial Production and Retail Sales data for October. This movement is understandable, as China is Australia's main trading partner, so any changes in the Chinese economy almost always have a direct impact on the AUD.
The latest data from China's National Bureau of Statistics (NBS) showed Retail Sales rose 2.9% year-on-year in October. This figure was slightly lower than September's 3.0%, but still better than the 2.7% forecast. Industrial Production rose 4.9% year-on-year, below expectations of 5.5% and also lower than the previous 6.5%. Meanwhile, Fixed Asset Investment remained depressed at -1.7% year-to-date, weaker than the -0.8% forecast. This combination of figures signals that China's economy is not yet fully recovered, but also not as bad as the market feared.
In a press conference, the NBS emphasized that China will continue to foster "new productive forces" and sees improving supply-demand dynamics. Rising prices for services and industrial goods helped push October's CPI inflation back into positive territory. Authorities assess this economic stabilization process as strong enough to support the year-round growth target, thus boosting sentiment toward China-sensitive assets, such as the Australian Dollar (AUD).
Domestically, the AUD also received additional support from improving employment data. Solid employment data led the market to believe that the Reserve Bank of Australia (RBA) would maintain a "restrictive" monetary policy stance. RBA Deputy Governor Andrew Hauser stated that the current policy is still considered tight, and if it becomes less restrictive, it would significantly influence future interest rate decisions. The combination of the "China isn't as bad as expected" signal and the RBA's cautious outlook is what makes the AUD appear more confident against the USD. (az)
Source: Newsmaker.id
