MUFG’s Lee Hardman notes that AUD/USD has fallen after the Australian Dollar (AUD) underperformed on softer China data and a cautious Reserve Bank of Australia (RBA). Weaker Chinese retail sales, industrial production and investment are seen weighing on the Aussie, while RBA minutes reinforce expectations for a June hold, limiting prospects for a sustained AUD/USD recovery in coming weeks.

China data and RBA minutes hit AUD

"The Australian dollar has underperformed at the start of this week undermined both by the release of softer activity data from China and the latest minutes from the RBA’s policy meeting earlier this month."

"The loss of growth momentum in China will increase pressure on domestic policymakers to provide additional stimulus to support growth."

"At the same time, it will dampen expectations for further renminbi strength in the near-term when USD/CNY is attempting to break below the 6.8000-level."

"After failing to hold above the 0.7200-level, AUD/USD is correcting lower reinforced by the latest RBA minutes indicating that board members agreed that a hike earlier this month “would give the board space to see how the conflict in the Middle East develops and how households and businesses respond”."

"The minutes have supported market expectations that the RBA will leave rates on hold at their next meeting in June."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)