AUD/USD Struggles at Resistance as Chinese Economic Bets Boost the Australian Dollar

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The Australian Dollar was the top performer of the day, with its value against the US Dollar increasing by 1.71%, its most significant jump since November.

This followed robust economic data from China that showed a boost in industrial output and retail sales, which boosted investor confidence in the Chinese economy and, subsequently, the Australian Dollar’s prospects.

The AUD/JPY pair also surged an impressive 2.92% on Wednesday, its best performance since 2016. The Japanese Yen had underperformed due to weak domestic data, such as negative inflation figures and soft consumer spending reports.

The news that Chinese regulators have approved USD 1.5 billion for Ant Group to raise capital has signalled confidence in the Chinese economy and its potential growth. This news was welcomed by investors, as reflected in the impressive performance of the Australian Dollar compared to the US Dollar and Japanese Yen on Wednesday.

China’s move also shows its commitment to reducing barriers between itself and Australia, mainly through announcing a partial end to a coal import ban from Australia. The ban had been in place for several months and created uncertainty for Australian coal exporters looking for new markets outside China.

The partial end to the ban means that Australian coal exporters can reaccess this valuable market, which could provide a much-needed boost to their revenues.

The release of the Federal Open Market Committee (FOMC) meeting minutes during Wednesday’s Wall Street trading session had a significant impact on the markets.

The minutes showed that most policymakers agreed that current economic conditions warrant continued support from their bond-buying program and keep short-term interest rates near zero. The central bank also acknowledged signs of improvement in several areas, including job growth, consumer spending and housing activity.

Citi economist Andrew Hollenhorst said, “Fed officials are growing more uncomfortable with the market underpricing their likely policy path and may use more hawkish rhetoric to drive front-end rates higher and financial conditions tighter.”

Overall, Wednesday saw strong returns across multiple asset classes, with much of it owed to investor optimism about China’s economic future and improved relations between China and Australia.

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