Australian Dollar, AUD/USD, Chinese GDP, Iron Ore, US Dollar, Fed – Talking Points
- of Australian dollar Steady China, then strong again GDP numbers
- China’s reopening hasn’t hit growth rate yet, but it’s helping commodities
- of U.S. dollar looks vulnerable.Are you excited? AUD/USD To new heights?
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China’s GDP far outperformed forecasts and the Australian dollar rose against the US dollar to yesterday’s six-month high.
China’s GDP in the fourth quarter printed at 2.9% year-on-year, against previous expectations of 1.6% and 3.9%.
Other Chinese data were released at the same time, with industrial production at 1.3% for the year to the end of December, at 0.1% as expected and 2.2% earlier.
Retail sales for the same period were -1.8%, well above the forecast of -9.0%, previously -5.9%, still negative.
GDP numbers capture China in lockdown, which reopened near the end of the quarter. The economic benefits may not be apparent for some time, as the massive outbreak of Covid-19 has materialized so quickly.
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Today’s data is very positive news for an economy that could strengthen further once Covid-19 restrictions are lifted in full and the number of cases begins to decline.
Ahead of the GDP release, the People’s Bank of China (PBOC) injected 504 billion yuan of liquidity through Libyan repos. This is the highest number since January 2019.
The CSI 300 stock index is at its highest level since August and the market is already pricing in expansion prospects for the world’s second largest economy.
Commodity markets are also supported by base metals, which have shown significant gains so far this year. Two of Australia’s main exports, iron ore and copper, are much higher, boosting appreciation for the Australian dollar, which has benefited from China’s resumption of economic activity.
Elsewhere, the US dollar is under pressure as markets appear to expect the Federal Reserve to ease its aggressive monetary tightening later this year.
This despite consistent messages from multiple members of the Federal Open Market Committee (FOMC) saying that rates should rise and stay there.
Gold is also trading near its highest level since April last year as interest in precious metals has increased due to a weaker dollar and rising demand for the metal.
With talk of China’s reopening and what appears to be a “big dollar” threat, it’s no surprise that the AUD/USD is experiencing some bullish momentum.
Charts – AUD/USD, Iron Ore, Copper, Gold, DXY INDEX (USD)
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— Written by DailyFX.com Strategist Daniel McCarthy
please contact daniel @DanMcCathyFX on Twitter