Will Strong China Numbers Boost the Aussie?
There was good news out of China on Friday, highlighted by GDP which was stronger than expected. The economy expanded by 5.4% y/y in the fourth quarter, up from 4.6% in Q3 and above the market estimate of 5.0%. This was the strongest pace of growth since Q2 2023. Industrial production jumped 6.2% in December, up from 5.4% in November and above the forecast of 5.4%. Finally, retail sales climbed 3.7% in December, compared to 3.0% a month earlier and blowing past the forecast of 3.0%.
The solid numbers out of China are a result of the government’s aggressive stimulus measures to kick-start the economy and no less important, boost business and consumer confidence. One strong month does not mean that China’s economic problems are over but the positive data is clearly a step in the right direction.
China’s exports rose in December jumped 10.7% which was higher than expected. Much of the gain was due to manufacturers rushing to fill orders ahead of Donald Trump taking office next week. Trump has threatened to slap China with tariffs and demonstrated in his first presidential term that he was willing to engage in a nasty trade war with China.
The improvement in China’s economy is good news for Australia, as China is its largest trading partner. China’s bumpy recovery since the Covid pandemic has led to lower demand for imports and Australia’s crucial export sector has felt the pinch. If China has turned the corner, it will be good news for Australian exporters and should provide a boost to the ailing Australian dollar, which has plunged 10.5% against the US dollar since October 1.
AUD/USD Technical
- 0.6217 is a weak line of resistance, followed by resistance at 0.6243.
- 0.6188 and 0.6162 are providing support.