China’s economy may have more problems in the future as Australian exports are at risk as AUD decreases.
A little contraction in the services center may greatly affect Australian exports. (Photo: BusinessWorld Online)
Australian Exports Are At Risk
The Australian dollar (AUD) decreased by 0.42% on Wednesday, ending the session at $0.67309 in which Australian exports are put at risk. Before this foreshadowed problem with the Australian exports, the AUD had reached a high of $0.67707 before dropping to a low of $0.67018.
The upcoming China Caixin Services PMI report on Thursday will be important for China’s economy as well as Australian exports. A contraction in the services sector would impact buyer demand for the AUD, affecting the Chinese economy and Australian exports.
Additionally, aside from the upcoming problems regarding Australian exports, the finalized Australia Services PMI for December showed an increase to 47.1 from the preliminary 46.0. In the US, the ADP employment change and initial jobless claims data will be watched closely as positive numbers could support wage growth and increase consumer spending.
According to a published article by FX Empire, this could lead to a more hawkish rate path by the Federal Reserve. The AUD/USD short-term forecast depends on the US labor market and ISM service sector data, with a break below the cause of the issues with Australian exports which is the $0.67286 support level which could potentially lead to further declines.
On the other hand, breaking through the problem with the Australian exports where the $0.67500 handle would bring the $0.68096 resistance level into play.
The Lowest Level Of Chinese Yuan
In a published article by Forex Factory, the Chinese yuan has reached its lowest level against the dollar since December 13th, despite efforts by the central banks to strengthen it.
The sentiment towards China’s economic recovery remains negative. US consultancy Rhodium Group predicts a cyclical recovery of 3.0-3.5% growth in 2024 but also acknowledges a long-term structural slowdown.
In December, global long-only funds sold off China equities at the fastest pace since 2023 to meet redemption requests and diversify away from China.
The yuan has also been affected by the rebound in the US dollar index as investors reassess the pace of US monetary policy changes. The Federal Reserve’s December meeting minutes confirmed the end of the rate hike cycle but disappointed those anticipating discussions on rate cut timing.
Recent cuts in saving rates by Chinese banks suggest a potential policy rate cut in January.
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