Breaking: China’s August Retail Sales rise 3.4%, Industrial Production up 5.2%

AUD/USD reaction to Chinese data

The soft Chinese data dump has little to no impact on the Australian Dollar (AUD). At the time of writing, the AUD/USD pair is trading 0.10% higher on the day at 0.6653.

Australian Dollar Price Last 7 Days

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies last 7 days. Australian Dollar was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.12%	-0.39%	-0.44%	0.09%	-1.55%	-1.10%	-0.21%
EUR	0.12%		-0.27%	-0.26%	0.20%	-1.42%	-0.94%	-0.09%
GBP	0.39%	0.27%		-0.06%	0.47%	-1.15%	-0.66%	0.19%
JPY	0.44%	0.26%	0.06%		0.47%	-1.13%	-0.80%	0.26%
CAD	-0.09%	-0.20%	-0.47%	-0.47%		-1.54%	-1.13%	-0.30%
AUD	1.55%	1.42%	1.15%	1.13%	1.54%		0.49%	1.35%
NZD	1.10%	0.94%	0.66%	0.80%	1.13%	-0.49%		0.86%
CHF	0.21%	0.09%	-0.19%	-0.26%	0.30%	-1.35%	-0.86%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

This section was published on Monday at 0:00 GMT as a preview of China's Retail Sales, Industrial Production data.

China Retail Sales, Industrial Production Overview

The National Bureau of Statistics of China (NBS) will publish its data for August at 02.00 GMT. Retail Sales is expected to show an increase of 3.8% year-over-year (YoY) in August, compared to 3.7% in the previous reading. Industrial Production is projected to show a rise of 5.8% YoY in the same period versus 5.7% prior.

Changes in Retail Sales are widely followed as an indicator of consumer spending. Meanwhile, Industrial Production shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk.

How could the China Retail Sales, Industrial Production affect AUD/USD?

AUD/USD trades on a negative note on the day in the lead up to the China Retail Sales, Industrial Production data. The pair loses ground as the US Dollar strengthens on a rise in US Initial Jobless Claims and a modest inflation uptick.

If data comes in better than expected, it could lift the Australian Dollar (AUD), with the first upside barrier seen at the September 12 high of 0.6669. The next resistance level emerges at the November 7, 2024 high of 0.6688, en route to the October 21, 2024 high of 0.6724. To the downside, the September 9 low of 0.6582 will offer some comfort to buyers. Extended losses could see a drop to September 5 low of 0.6511. The next contention level is located at the 100-day Exponential Moving Average (EMA) at 0.6490.

Economic Indicator

Retail Sales (YoY)

The Retail Sales data, released by the National Bureau of Statistics of China on a monthly basis, measures the value of goods sold by retailers in China. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the YoY reading comparing sales values in the reference month with the same month a year earlier. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.