AUD/USD in Focus: China Economy to Fuel Aussie Dollar Demand
Meanwhile, economic data from China will be a key focus for the AUD/USD pair. Economists expect Chinese industrial profits to rise 1.5% year-to-date in May compared to the first five months of 2024, up from 1.4% in April.
A pickup in industrial profits may boost investments and demand. Given China accounts for around one-third of Aussie exports and Australia has a trade-to-GDP ratio of above 50%, an improving demand environment may lift the Aussie economy. An improving economic backdrop could also support a less dovish RBA policy stance.
Conversely, a lower reading may indicate weaker Aussie trade terms and support a more dovish RBA rate path.
Later today, the US inflation numbers will influence US-Aussie interest rate differentials and AUD/USD trends.
Softer-than-expected inflation and personal income/spending could boost Q3 Fed rate cut bets, narrowing the rate differential. A narrower rate differential favoring the Aussie dollar could drive AUD/USD toward $0.66.
Conversely, hotter inflation and rising personal income/spending would widen the rate differential favoring the US dollar. A wider rate differential on fading Fed rate cut bets may push AUD/USD below $0.65 toward the 50-day Exponential Moving Average (EMA).
