Australia, NZ dollars hold onto gains, taking weak China GDP in stride

17 Jul, 2023

SYDNEY: The Australian and New Zealand dollars took a breather on Monday after solid gains last week, and reacted little to a mixed set of economic data from China that showed the post-COVID rebound in the two currencies’ biggest export market is “clearly over”.

The Aussie was off 0.3% to $0.6821, having slid 0.7% last Friday as it fails to breach a key resistance level of 69 cents. After gaining 2.2% last week, the currency has support at the 200-day moving average of $0.6708.

The kiwi dipped 0.2% to $0.6355, after consolidating gains on Friday that sent the currency up 2.6% for the week. It faces resistance at a five-month top of $0.6412, while having major support at around 62 cents.

Australia, NZ dollars head for best week this year as US dollar buckles

Data on Monday showed that the world’s second-largest economy expanded at 0.8% in the second quarter from the previous quarter, beating expectations for just 0.5% growth, and annual growth rate registered an underwhelming 6.3%

“The data suggests that China’s post-COVID boom is clearly over,” said Carol Kong, economist at Commonwealth Bank of Australia in Sydney.

“The higher-frequency indicators are up from May’s numbers, but still paint a picture of a bleak and faltering recovery and at the same time youth unemployment is hitting record highs.”

Still, the data was not as bad as some analysts had feared.

“The data highlighted that stimulus is required to reinvigorate the economy and the supporting measures are on the cards,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

In the meantime, investors were awaiting minutes from the Reserve Bank of Australia on Tuesday for the July policy decision and local jobs report on Thursday, as they could provide some clue to what the central bank will decide in August.

Markets are leaning towards a pause from the RBA in August although they have fully priced in a quarter-point increase in interest rates by the end of the year.

The government on Friday appointed Michele Bullock as the next head of the Reserve Bank, first female governor in the bank’s history, although there is little market reaction as Bullock is largely seen as a safe pair of hands, suggesting continuity for the monetary policy.

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