USD to AUD Rate Reverses at 0.66 as China Inflation Pics Up

The USD to AUD rate continues to show volatility, falling 1.5 cents on Monday morning, but then reversing and climbing 2.5 cents higher, with AUD/USD retesting 0.66. Earlier this morning we had the inflation report from China, which was expected to remain stable, with both PPI and CPI inflation expectations for July barely moved.

After hitting new 2024 lows of 0.6349 on Monday, AUD/USD managed to regain some ground, climbing back above the 0.6500 level on Tuesday’s reversal and returning to the consolidation zone. Despite this recovery, the Reserve Bank of Australia (RBA) continues to maintain its policy stance.

AUD/USD Chart Daily – Failing at the 100 SMA

Following the RBA’s policy decision earlier this week, AUD/USD found support after Governor Bowman stated that the board had not discussed lowering interest rates, even as most major central banks have adopted a dovish approach and begun cutting rates. However, the Australian dollar remains widely seen as a risk currency, closely tied to China’s economic performance, which has shown signs of weakness in 2024.

China PPI and CPI inflation Reports for July

• CPI (Consumer Price Index):
  • July YoY: +0.5% (vs. +0.3% expected), indicating a slightly higher-than-anticipated increase in consumer prices compared to June’s YoY increase of +0.2%.
  • July MoM: +0.5% (vs. +0.3% expected), marking a rebound from June’s MoM decline of -0.2%.
• PPI (Producer Price Index):
  • July YoY: -0.8% (vs. -0.9% expected), showing a continued decline in producer prices, although the drop was slightly less than expected. The previous PPI YoY was at 0.8%.

The latest data reveals that both CPI and PPI figures have exceeded expectations, with CPI showing a more significant increase and PPI declining less than anticipated. The uptick in consumer inflation reduces the immediate risk of deflation in China, suggesting a slight improvement in economic stability. This development points to some positive adjustments in domestic spending habits. Given that weak domestic demand has been a drag on GDP, these figures are a welcome sign of potential recovery, offering a glimmer of hope for strengthening economic momentum.

AUD/USD Live Chart