AUD/USD keeps range around 0.7180 on upbeat China trade data

  • AUD/USD has rebounded to near 0.7180 on better-than-expected Chinese trade data
  • Aussie bulls are underperforming despite the 50 bps rate hike announcement by the RBA.
  • The DXY is expected to resume its upside journey amid uncertainty ahead of the US inflation.

The AUD/USD pair has attempted to overstep 0.7180 as China’s National Bureau of Statistics has reported better-than-expected trade data for year till date (YTD). In dollar-denominated terms, the imports have improved by 4.1% while exports have jumped firmly by 16.9%. The USD Trade Balance has landed at $78.76B, much higher than the estimates of 58B and the prior print of 51.12B. It is worth noting that Australia is a leading trader partner of China and Chinese trade data holds a significant impact on the antipodean.

Aussie bulls are underperforming against the greenback despite the announcement of a bumper rate hike by the Reserve Bank of Australia (RBA). The RBA elevated its Official Cash Rate (OCR) by 50 basis points (bps). As per the market consensus, a rate hike by 25 bps rate was expected.

The rationale behind the forecast of a 25 bps rate hike was higher inflation and a weak employment situation. Last week, the Australian economy reported the Employment Change of 4k ie the economy had managed to create 4k jobs in May, which were significantly lower than the expectations of 30k.

More quantitative tightening measures reduce employment opportunities due to the scarcity of liquidity in the economy. Therefore, a rate hike by a quarter to a percent was more optimal. Now, extreme quantitative restricting measures may result in inefficiency in the employment generation process.

On the dollar front, the US dollar index (DXY) is struggling to sustain above 102.60. Odds are favoring more upside in the DXY as investors are awaiting the release of Friday’s US inflation. A preliminary estimate for the annual inflation rate is 8.3% while the core Consumer Price Index (CPI) is seen at 5.9%, lower than the prior print of 6.2%.

.

Leave a Comment