Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China data weighs
The Australian dollar was mostly weaker overnight with poor Chinese data weighing on the currency ahead of today’s all-important Reserve Bank of Australia decision.
The AUD/USD slipped back to one-month lows as it found support around 0.6575.
China’s key monthly activity data saw industrial production (5.6% in May from 6.7% in April) and fixed asset investment (4.2% in May from 4.0% in April) both miss expectations. Retail sales were better, however.
In more gloomy news from China, house prices remained muted, with new home prices down 4.3% in May compared with 12 months ago.
The Chinese yuan weakened with USD/CNH up 0.1% as the pair returned to major resistance at the seven-month highs.
Euro rebounds from recent lows
In other markets, the euro strengthened, with the EUR/USD rebounding from one-month lows.
The euro has been substantially lower over the last week after a strong showing of far-right parties in EU parliamentary elections caused French president Emmanual Macron to call snap national elections for 30 June and 7 July.
A Le Point poll, quoted in Reuters on 14 June, found a “far-right” coalition was currently at 29.5%, a “far-left” coalition at 28.5%, while Macron’s centrist coalition was at only 18%.
However, some of the euro’s weakness abated over the weekend, with the AUD/EUR falling from the year’s highs, while NZD/USD fell from 13-month highs.
RBA likely to lag central bank cutting cycle
Looking to today’s RBA decision, a Reuters poll published on 14 June found that all economists surveyed expect the central bank to remain on hold.
Australia’s most recent monthly inflation report found annual inflation climbed from 3.5% in March to 3.6% in April – the second consecutive monthly rise.
While many other economies are seeing inflation ease, Australian inflation remains more persistent, causing the RBA to be less likely to cut rates. This could be supportive for the AUD as we enter the second half of 2024.
Local financial markets don’t see an RBA rate cut fully priced in until March 2025 (source: ASX).
China data weighs on APAC FX
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 June
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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