China data disappoints
The Australian dollar was sent lower yesterday after economic data continued to show the Chinese recovery was faltering.
Most importantly, Chinese industrial production fell well short of expectations, with an annual rate of 5.6% versus forecasts for 10.9%.
A weaker industrial production number suggests a slowdown in demand for commodities and hurts the Aussie. The AUD/USD fell 0.6%.
Chinese annual retail sales were also below forecasts at 18.4% versus forecast for a strong post-lockdown bounce to 22%.

US economy continues to surprise
On the other hand, US data remained solid overnight, causing US bond yields to climb, and US shares to weaken.
US industrial production was up 0.5% in April – above forecasts for a flat result. The National Association of Home Builder housing index was at 50 – a sign of improving sentiment – for the first time since July last year.
US retail sales were reported at a still-solid 0.4% despite being below forecasts for 0.8%.
The strong US data suggests the Federal Reserve might need further rate hikes to slow the economy and saw US bond yields, and the US dollar, higher overnight.

Australian wages data key
Today, all eyes are on the Australian March-quarter wage price index, due at 11.30am AEST.
Wages are a key driver of inflation but while the forecast annualised rate of 3.6% is the highest since 2012 it remains well below levels that should cause the Reserve Bank of Australia concern.
Yesterday, the Reserve Bank of Australia minutes signaled the central bank remains worried about the potential for further inflationary pressures down the track, with the “finely balanced” decision to hike rates to 3.85% at the start of the month driven by expectations about strong population growth, low retail vacancies and a tight jobs market.

Aussie back near seven-day lows after China data
Table: seven-day rolling currency trends and trading ranges

Key global risk events
Calendar: 15 – 19 May

All times AEST
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