Aussie dollar being weighed down by Chinese economic data

“While China’s economic data has taken a back seat of late, that heavy sentiment is weighing on the Aussie and will likely keep the top side in check short term,” said Stephen Innes, senior currency trader at FX and CFD broker OANDA Australia and Asia Pacific.

 According to Innes, with more fissures appearing in China’s economic data fuelling concerns that mainland economy is again losing momentum, it could take some of the shine off the Australian dollar.

At the same time, base metal prices closed last week on a sour note. And if not for the increasing chatter about the possibility of more stimulus from the People’s Bank of China (PBOC), metals prices could have suffered a more precipitous decline, Innes noted.

On the domestic front, increasing noise about a possible Reserve Bank of Australia (RBA) rate cut may weigh on sentiment building up to Tuesdays RBA minutes.

According to Innes, “But with few, if any surprises expected, the G-3 central bank dovish storyline will remain intact. Also, you have to consider the weaker US Retail Sales, and consumer sentiment reports that will likely power the US dollar narrative for the remainder of the month,”

“As such, we could expect the Aussie dollar to remain supported on dips as markets stay in yield-seeking mode especially so if the US dollar, as expected, continues to flounder this week.”

 The Australian Employment report is due this week. But Innes said, “Given the data proclivity to surprise, there should be little sustained impact on the Aussie one way or the other.”

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