AUD/USD Under Pressure After China Data Misses Expectations
The AUD/USD weakened for the third consecutive day and traded around 0.7130 during the Asian session on Monday (May 18). The Australian dollar was under pressure after the release of economic data from China, Australia's main trading partner, showed weakening activity.
China's retail sales in April rose only 0.2% (yoy), well below the 2.0% expected and slowing from 1.7% in March. Industrial production rose 4.1% (yoy), also below the 5.9% forecast and lower than the previous 5.7%, while fixed asset investment recorded -1.6% (ytd yoy) compared to expectations of +1.6%.
Externally, the US dollar strengthened as markets assessed that the Federal Reserve could take a more aggressive stance on inflation. Several Fed officials emphasized inflation as a top priority and left open the possibility of additional interest rate hikes if price pressures persist.
This change in expectations is reflected in the CME FedWatch report, which shows the probability of a December interest rate hike has risen to around 48% from 14% a week earlier. A stronger dollar generally pressures riskier currencies and weighs on AUD/USD.
Sentiment is also overshadowed by increased demand for safe-haven assets amid geopolitical tensions. The US and Iran are said to be far from an agreement to end the conflict and reopen the Strait of Hormuz; President Donald Trump's warnings against Iran have added to the uncertainty, while the closure of the waterway has kept oil prices high and added to the burden on energy importing countries. (asd)
Source: Newsmaker.id
