Above: Terminal, Shanghai, China. Image © Adobe Stock
The Australian Dollar slipped to a fresh 2023 low against the British Pound and was softer against all its major peers on the day it was announced China saw a sharp slump in both imports and exports in July as an economic malaise continued.
China reported a 12.4% year-on-year decrease in imports, down on June's 6.8% drop, and below analyst expectations for a reading of -5.6%. It was reported that China's imports from Australia fell a sizeable 10.9% in July, helping explain Tuesday's slide in the Aussie currency.
The latest trade figures suggest the downturn in the world's second-largest economy continued into mid-year amidst a slump in global demand for its goods. Chinese exports fell 14.5% y/y in July, after dropping 12.4% in June, the consensus was -13.2%.
"Chinese exports declined at a faster rate in July, in an indication of waning global demand," says Duncan Wrigley, Chief China Economist at Pantheon Macroeconomics.
"Chinese exports are undergoing a pronounced downward trend – as the July data published today illustrates. Even more so than analysts had predicted beforehand," says Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.
The effect of the data on the Australian Dollar was noticeable with the currency falling against all its peers:
Above: AUD fell against all G10 peers on August 08.
The Pound to Australian Dollar exchange rate meanwhile rose to its highest level since April 2020 at 1.9540 as the entrenched uptrend that has held a grip over this pair since September 2022 extended and we note little to suggest a turnaround is imminent.
The Australian-U.S. Dollar exchange rate meanwhile fell 0.70% to 0.6527 which puts the pair near a major support line (0.65), which if broken could result in a decline to the 2022 lows located near 0.64.
With a dearth of Australia-centric data releases the Australian Dollar was always likely to find developments in China as being the key near-term driver and today's trade data will be followed by a midweek Chinese inflation release that will likely confirm deflationary trends are setting in amidst the economic slowdown.