It has been a solid start to the week for China, with some positive data that is showing some decent signs for the economy.

Today we saw China Industrial production for June 2019 come in at 6.3% y/y which was a strong. Expected was 5.2% and a prior of 5.0% was a 17 year low. GDP was in line with expectations and retails sales were higher.

While GDP was in-line as mentioned it is still relatively low in the scheme of things, but that said, China has surged so much in the last 20-years it isn’t going to able to maintain those lofty levels easily for the next two decades.

The response from the commodity currencies has been positive. The AUD/USD has jumped as has the NZD/USD. Leading into the data, the Aussie was actually weak, but the Kiwi had got out to a strong lead.

The Aussie is now pushing towards key resistance at 0.7050. For the time being, it looks like 0.7000 will hold but there is a fair bit of water to go under the bridge on that.

Clearly, the kick that we’ve seen in the AUD/USD was on the back of a falling Greenback. Powell was speaking to Congress last week and he basically said a rate cut is happening. The question is not if but how much? So from that perspective, it will be interesting to see if the USD will continue to sell-off this week. I feel that surely we have now priced that move in as even prior to his testimony the market predicting a cut in July.

On Thursday, there is employment data for Australia, which will be a key moment for the Aussie. If the jobless rate can’t fall, the odds of a third rate cut will skyrocket. Despite the fact, those cuts will likely not be passed on to borrows as bank margins are already squeezed.

At the same time, the NZD is looking at a rate cut of its own when the RBNZ meets next time around in August. That said, the NZD/USD has been strong today.