The Australian dollar has come under pressure today after another round of disappointing data from China all but confirms that the worlds 2nd largest economy is in a downward spiral.
Two companies, namely Caterpillar and Nvidia reported earnings well below consensus and laid the blame solely with China and this followere a similar statement from Apple, who also reported disatorous earnings recently from China.
“The new week has begun with a broad risk-off tone as Caterpillar and Nvidia reveal disappointing earnings reports citing a slowdown in Chinese demand for their struggles. Caterpillar and Nvidia are not the first companies to blame China for their afflictions, but both companies are seen as industry bellwethers and their disappointing results provide further evidence that this time China’s slowdown is for real,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
China is Australia’s biggest trading partner and any slowdown is going to hit the Australian dollar like we saw today and will cause the Reserve bank of Australia to consider their next interest rate move which many now predict will be down, not up.
Inflation figures due out later this week are expected to hit the market below expectations and this coupled with the problems from China may see the Aussie dollar fall below US70c again.
"With inflation likely to remain entrenched below target and external risks on the rise since policymakers last met, uncertainty around the February monetary policy meetings should rise. said Tom Nash, a strategist at HSBC.
For the AUD, any sign that the RBA optimism is starting to be tested, particularly relating to the oft-repeated statement that the ‘next move is more likely to be up’, would likely open up a move in AUD-USD below US70c,"he added.
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