Despite a solid performance from the Chinese economy’s GDP in the fourth quarter of 2019, this was not enough for the Australian dollar to rally over the weekend. Investors are looking ahead to upcoming data releases for a boost. However, the market warns that the upcoming consumer confidence index for Australia may not return a favourable figure. Investors are also keen to observe the results from this Thursday’s labour market data as any negative outcomes will weigh heavy on the cautious Reserve Bank of Australia (RBA). Meanwhile, the GBP will look for a rebound after its surprise decline in December’s UK retail sales data which were revealed before the weekend.
Growth in the Chinese Market Unfortunately Doesn’t Trickle Over to Australia
The AUD is heavily linked with the Chinese economy, in most circumstances, the Aussie benefits from an increase in Chinese trade as their exports are primarily traded with China. However, recent growth from the Chinese economy has done little to boost the Australian economy. A reported 6% annual growth rate in Q4 was not enough to boost the AUD as these figures evidenced a slowing down in the growth rate for the country. With many US tariffs still in place on Chinese produce, investors are wary that there is potential for a further slowing and loss of growth momentum. Despite signing the Phase One deal with the US recently, the market response has been lacklustre, as an apprehension of the two reaching an agreement on a Phase Two deal before the year-end remains. A lack of market risk appetite could keep the AUD trading lower as the week continues until the release of significant market data in the form of the consumer confidence index and labour market data.
Westpac Consumer Confidence Index Could Put Pressure on the AUD Exchange Rates
The AUD is set to trend lower as sentiment weakened at the start of 2020, reducing the confidence in the health of the Aussie economy. The AUD will likely decline as the risk of a sustained loss of economic momentum grows. Thursday will see the release of the labour market data for Australia. The market could remain unchanged provided the data shows little change on the unemployment rate. But if the data shows an increase in unemployment, then the AUD will likely suffer and lose footing to rivals like the GBP. With its recently increased cautiousness, the RBA will likely react should the data take a turn for the worse, which will likely weigh on the currency.
The outlook for Australia’s January manufacturing and services PMI do not look likely to help the currency either, with forecasts expecting a slip into a deeper state of contraction. The Australian Dollar seems helpless until an uptick in market risk appetite occurs which could help the currency rebound into positive footing in the short term.
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