The Australian Dollar (AUD) has experienced a significant decline of approximately 3.5% against the US Dollar (USD) since July 12. While the Australian economy has been creating more jobs per month than before the pandemic, the recent labor market data did not have the expected positive effect on the AUD. This should have supported the Aussie dollar, but it seems that other external factors are at play.
One of the key factors contributing to the weakening of the AUD is the situation in China. Weak economic data and a lackluster Third Plenum have added pressure on the Chinese economy, leading to concerns about its impact on industrial metals markets. Furthermore, the absence of additional stimulus announcements following the July Politburo meeting has raised uncertainties about China’s economic outlook, which in turn has negatively affected the AUD.
The future trajectory of the AUD will likely be influenced by key economic indicators in both Australia and China. Australian inflation data set to be released early next week will be a crucial factor in determining the Reserve Bank of Australia’s next monetary policy move. Additionally, new purchasing manager indices from China will provide insights into the country’s economic performance, which could have a significant impact on the AUD’s value in the coming days.
The Australian Dollar faces challenges against the US Dollar amidst a complex economic environment. While positive labor market data in Australia should have supported the AUD, external factors such as weak economic data in China and uncertainties surrounding stimulus measures have weighed on the currency. The upcoming release of inflation data in Australia and purchasing manager indices in China will be critical in determining the future direction of the AUD. Investors and analysts will closely monitor these developments to gauge the potential impact on the Australian Dollar’s performance in the foreign exchange market.