Australian Dollar Responds to Chinese Economic Data while US Data Remains Uncertain

The Australian dollar (AUD) has been in the news lately as investors watch for signs of movement in the Chinese economy. You see, China is a big importer of Australian commodities, which makes the AUD particularly sensitive to economic data coming out of the country.

Earlier today, the AUD was looking to the economic calendar for clues on how things are going in China. The data was mixed but overall positive. Fixed asset investment jumped to 5.5%, indicating that there’s been a significant improvement in construction project investments. This is good news for the commodity export sector, which is a major contributor to the Australian economy.

The AUD is what we call a pro-growth currency. That means it tends to respond well to positive economic news. In this case, the hopefulness surrounding commodity exports gave the AUD a boost. On the other hand, the USD has been causing some uncertainty lately. The PPI and retail sales reports for February are expected to come in lower than prior releases, which could lead to the weakening of the USD.

But wait, there’s more! The Fed’s path forward is still unclear following yesterday’s US CPI release. And let’s not forget the recent collapses of Silicon Valley Bank (SIVB) and Signature Bank, which are still causing some concern about their impact on the global economy.

Australian Dollar Weaker Than the Dollar on Wednesday

The daily AUD/USD price action shows that the AUD is currently marginally weaker against the USD year-to-date, wiping out all of its 2023 gains since early February. It’s not all doom and gloom, though. With the world still grappling with the COVID-19 pandemic, it’s no wonder that uncertainty remains high, and volatility in the financial markets is likely to continue.

What’s next for the AUD? Well, investors will be watching the economic calendar for further data releases that may provide insight into the direction of both the Australian and US economies. And, as always, we’ll be keeping a close eye on China, the world’s largest importer of Australian commodities.