Australian Dollar Bolstered by China's "Surprisingly Strong" Data
- Written by: Gary Howes
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Activity Data out of China helps the Australian Dollar outperform most peers.
The Australian Dollar gained on the majority of its G10 counterparts ahead of the weekend helped by a string of above-consensus growth data from China.
Quarterly growth disappointed at 0.9% q/q, below expectations for 1.0%, but the rest of the docket pipped expectations.
"China's September data came in surprisingly strong, with both industrial production and retail sales at the top end of analysts' estimates," says a note from TD Securities.
The Australian dollar is a proxy for Chinese economic output as China is Australia's most important export destination.
The currency has outperformed over the duration of the past month as investors cheer a number of steps taken by Chinese authorities to bolster growth.
Annual GDP beat expectations at 4.6% y/y (consensus: 4.5%, up from Q2's 4.7%), and Chinese industrial production rose 5.4% y/y (consensus 4.6%, up from August's 4.5%).
Retail sales also rose to 3.2% y/y, beating consensus expectations of 2.5% and up from August's 2.1%.
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The data shows year-to-date growth is tracking at 4.8%, which puts it in touch with the mandated 5% GDP target.
"Given the extra boost from monetary policy and fiscal funds being reallocated to the urban village renovation project, we see GDP this year at 4.9% as largely achievable," says TD Securities.
Analysts say the focus now shifts to the NPC meeting in the coming weeks, which will approve a new fiscal stimulus package, with the funds largely earmarked for 2025.
The Aussie can continue to outperform as long as newsflow pertaining to China remains supportive. However, it could also prove sensitive to the impending U.S. election where betting markets show the odds of a second Donald Trump presidency are on the rise.
Analysts say Trump is a default USD-positive outcome, and headwinds to the Aussie Dollar include the significant tariffs he wants to levy on Chinese imports.
This could unwind recent positivity to all things China, the Aussie included.
"The antipodeans are highly exposed to tariffs on China, which may well overshadow any benefit from Beijing’s stimulus measure," says Francesco Pesole, FX strategist at ING Bank.
