China’s economic growth in the second quarter of 2024 exceeded market expectations, with the GDP expanding by 4.7% compared to 5.3% in the previous quarter. The National Bureau of Statistics released official data showing a 0.7% quarterly growth rate, lower than the 1.5% in the first quarter and below the market forecast of 1.1%. Retail sales in June climbed 2.0% year-over-year, lower than the 3.1% expected, while industrial production increased by 5.3% year-over-year, surpassing estimates.
Meanwhile, fixed asset investment in China rose by 3.9% year-to-date in June, in line with expectations but slightly lower than the previous month. The weaker-than-expected GDP data had a mild bearish impact on the Australian Dollar, causing the AUD/USD pair to decline towards 0.6750. At the time of writing, AUD/USD was down 0.19% on the day, trading at 0.6768. The Reserve Bank of Australia plays a crucial role in influencing the Australian Dollar by setting interest rates to maintain stable inflation rates.
Australia’s largest trading partner, China, also affects the value of the Australian Dollar. Positive growth in the Chinese economy leads to increased demand for Australian exports, strengthening the AUD. Conversely, any slowdown in the Chinese economy can negatively impact the Australian Dollar. The price of Iron Ore, Australia’s main export, is another factor that influences the value of the Australian Dollar. Higher Iron Ore prices lead to an increase in demand for the AUD, while lower prices have the opposite effect.
The Trade Balance, which measures the difference between a country’s export earnings and import expenses, also plays a role in determining the value of the Australian Dollar. A positive net Trade Balance, resulting from strong export demand, strengthens the AUD, while a negative balance weakens it. Overall, various economic factors, including interest rates set by the RBA, Chinese economic health, Iron Ore prices, and the Trade Balance, impact the value of the Australian Dollar in the foreign exchange market. Traders and investors closely monitor these factors to make informed decisions when trading the AUD.
