The AUD/USD pair trades 0.10% lower to near 0.6645 during the Asian trading session on Monday. The Aussie pair is under pressure as the National Bureau of Statistics of China has reported unexpectedly weak Chinese Retail Sales and Industrial Production data for November.
The impact of a dramatic change in Chinese domestic data remains significant on the Australian Dollar (AUD), given the higher dependence of the Australian economy on its exports to Beijing.
China’s Retail Sales grew by 1.3% on an annualized basis in November, while they were anticipated to rise steadily by 2.9%. The Industrial Production data came in at 4.8%, down from 4.9% in October. Economists anticipated the factory data to have risen by 5%.
The Australian Dollar has been correcting over the last two trading days, following the release of the weak labour market data for November. The data on Thursday showed that the economy shed 21.3K jobs in November, while it was expected to have added 20K fresh workers, raising concerns over the labor market strength.
Meanwhile, the broader outlook of the Aussie pair remains firm as the US Dollar (USD) struggles to regain ground amid hopes that the Federal Reserve (Fed) will deliver more interest rate cuts in 2026 than it had projected in last week’s policy meeting. In the policy announcement on Wednesday, the Fed’s dot plot showed that policymakers collectively see the Federal Fund Rate falling to 3.4% by the end of 2026, indicating that there will be only one interest rate cut next year.
This week, the major trigger for the US Dollar will be the United States (US) Nonfarm Payrolls (NFP) data for November, which will be released on Tuesday.
Australian Dollar FAQs
One of the most significant 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 key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
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 influences the level of interest rates in the economy as a whole. The main goal of the RBA 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 AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Source: https://www.fxstreet.com/news/aud-usd-trades-lower-around-06650-amid-unexpectedly-weak-china-data-202512150315
