The latest data released by the National Bureau of Statistics on Monday showed that Chinese retail sales rose 1.3% year on year in November versus 2.9% expected and 2.9% in October.
China’s industrial production rose 4.8% year-on-year in the same period, compared to expectations of 5.0% and 4.9% previously.
Meanwhile, investment in fixed assets reached -2.6% year-to-date year-on-year in November, exceeding the expected figure of -2.3%. The October reading was -1.7%.
AUD/USD reaction to Chinese data
The downbeat Chinese data has little impact on the Australian Dollar (AUD). At the time of writing, AUD/USD was trading 0.03% higher on the day at 0.6653.
The price of the Australian dollar this week
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies listed this week. The Australian dollar was the weakest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.03% | 0.05% | -0.16% | -0.07% | -0.11% | -0.04% | -0.05% | |
| euro | 0.03% | 0.09% | -0.15% | -0.05% | -0.06% | -0.01% | -0.02% | |
| GBP | -0.05% | -0.09% | -0.10% | -0.13% | -0.15% | -0.10% | -0.11% | |
| JPY | 0.16% | 0.15% | 0.10% | 0.10% | 0.06% | 0.10% | 0.32% | |
| Canadian | 0.07% | 0.05% | 0.13% | -0.10% | -0.03% | 0.03% | 0.17% | |
| Australian dollar | 0.11% | 0.06% | 0.15% | -0.06% | 0.03% | 0.05% | 0.04% | |
| New Zealand dollar | 0.04% | 0.01% | 0.10% | -0.10% | -0.03% | -0.05% | -0.01% | |
| Swiss franc | 0.05% | 0.02% | 0.11% | -0.32% | -0.17% | -0.04% | 0.00% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Australian dollar from the left column and move along the horizontal line to the US dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section was published on Monday at 00:00 GMT as an introduction to data on retail sales and industrial production in China.
Retail sales in China, industrial production overview
China’s National Bureau of Statistics (NBS) will publish its data for November at 02.00 GMT. Retail sales are expected to show a 2.9% year-on-year increase in November. Meanwhile, industrial production is expected to show a 5.0% year-on-year rise in the same period versus 4.9% previously.
Changes in retail sales are widely followed as an indicator of consumer spending. Meanwhile, industrial production shows the production volume of Chinese industries such as factories and manufacturing facilities. The rise in output is seen as inflation, which could prompt the People’s Bank of China to tighten monetary policy and fiscal policy risks.
How could retail sales and industrial production in China affect the AUD/USD pair?
The AUD/USD pair is trading positively during the day ahead of China’s retail sales and industrial production data. The pair rises as the US dollar declines on the prospect of interest rate cuts by the US Federal Reserve next year.
If the data comes in better than expected, it could push the Australian Dollar (AUD) higher, with the first upward barrier seen at the December 11 high of 0.6680. The next resistance level appears at the Sep 17 high at 0.6707, on the way to the Oct 14 2024 high of 0.6750.
On the downside, the December 11 low at 0.6626 will provide some relief to buyers. Extended losses could see a drop to the high seen on October 28 at 0.6590. The next competition level is at the 100-day moving average at 0.6540.
Frequently asked questions about the Australian dollar
One of the most important factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country, another major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is one factor, in addition to Australia’s inflation, its growth rate and its trade balance. Market sentiment – whether investors are snapping up riskier assets (risk on) or looking for safe havens (risk off) – is also a factor, with risk appetite positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This affects the level of interest rates in the economy as a whole. The RBA’s main objective is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the Australian dollar, and relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian Dollar (AUD). When the Chinese economy is performing well, it buys more raw materials, goods and services from Australia, which raises demand for the Australian dollar, raising its value. The opposite is the case when the Chinese economy does not grow as quickly as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its crosses.
Iron ore is Australia’s largest export, representing $118 billion annually according to 2021 data, and China is its main destination. Therefore, the price of iron ore could be a driver of the Australian dollar. In general, if the price of iron ore rises, the Australian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of iron ore falls. Higher iron ore prices also tend to increase the likelihood of a positive trade balance for Australia, which is also positive for the Australian dollar.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value from the excess demand generated by foreign buyers seeking to buy its exports in exchange for what it spends to buy imports. Therefore, a positive net trade balance strengthens the Australian dollar, with the opposite effect if the trade balance is negative.
