Aussie Rallies on Encouraging Chinese Data

AUD

The Australian dollar strengthened against rivals supported by the encouraging Chinese economic data. The Reserve Bank of Australia lowered interest rates in two consecutive meetings to boost the economic activity as the board was afraid of the significant slowdown of the Chinese economy. The Chinese Industrial Production rose by 6.3%, the Retail Sales jumped by 9.8%, and the Fixed Asset Investment grew by 5.8%. Despite the stronger-than-expected data, the Q2 GDP YoY came in at 6.2% showing that the Chinese economy grew at the slowest pace in 27 years. Market participants await the minutes of the last RBA meeting and the Australian labor figures later this week. The AUDUSD rose to an eleven-day high of $0.7035, and the EURAUD tumbled to a two-month low of 1.6020.

USD

The dollar index which measures the greenback against a basket of major currencies drifted lower to 96.78 as investors await a 25 basis point rate cut. Last week, during his semi-annual monetary policy testimony before Congress, the Federal Reserve Chairman Jerome Powell almost ruled out an interest rate cut at the coming meeting. He affirmed that the Fed would be acting as appropriate to support the ongoing longest US economic expansion in history, indicating that the Fed has room to ease policy. His words pushed the dollar lower despite a surge in Core CPI figures in June. The CME Fed watch tool is showing a probability of 76.5% and 23.5% of a rate cut by 25 and 50 basis points, respectively. The US 10-year yields held steady near 2.135%, the USDJPY dropped to 107.80, and the EURUSD climbed to $1.1286.

 Metals

The price of a gold ounce is still showing resilience support by the prospects of an interest rate cut, despite the improvement in risk sentiment. The precious metal traded between a high of $1420 and a low of $1410 during today's Asian session, the silver ounce edged higher to $15.26, and palladium rallied to $1570.

Oil

Oil prices continued to consolidate in a tight zone near a multi-week high awaiting fresh fundamental drivers. The surged in Chinese Production Output pushed prices slightly higher, but the soft GDP figures capped gains. The West Texas Intermediate crude futures bounced off $59.90 to trade higher at $60.24, and Brent futures hovered near $66.70.

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