After finishing Thursday’s session in negative territory, the Australia dollar was slipping lower again across the European session on Friday. At the time of writing the Aussie dollar US dollar is trading 0.1% down at US$0.6890. Across the week as a whole AUD/USD is off by 0.2%.
The Australian dollar is trending southwards following data from China that showed Chinese economic growth was the slowest in 29 years. The world’s second largest economy grew at 6.1%across 2019, the lowest rate of growth since 1990, despite a trade truce following the long-winded trade dispute with US.
6.1% growth was below analyst expectations, although within Beijing’s forecasts. The data shows that the Chinese economy is under pressure. However, what remains unclear is whether the damage from the trade dispute has almost run its course, or whether weakness in other areas of the economy are only just starting to take hold.
China is Australia’s principal trading partner, therefore weakness in the Chinese economy is often reflected through weakness in the Australian dollar.
With no more data due this week, investors will move their focus towards the coming week, with the release of consumer confidence on Tuesday.
Will US Industrial Production Drag USD Lower?
The US dollar advanced in the previous session after data showed that retail sales climbed again in December for the third straight month. Retail sales grew by 0.3% month on month in December and November’s reading was revised high to 0.3%, up from 0.2%.
With solid job creation, wage growth and consumer confidence at the highest level in 7 months, households were prepared to spend across December. This is good news for the consumer driven US economy.
Today the dollar is extending those gains as investors look ahead to mid tier releases on the economic calendar. Building permits and industrial production could hit demand for the dollar, as analysts are expecting to see a decline month on month.
Industrial production is expected to decrease -0.1% month on month and could fuel fears that the US manufacturing sector is not recovering from its slump despite the phase one trade deal.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 USD = 0.6784 AUD
Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar.
Or, if you were looking at it the other way around:
1 AUD = 1.4739 USD
In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar.