Australian Dollar Strengthens as US-China Trade Talks Grab Attention

On Monday’s Asian session, the Australian dollar gained strength against other major currencies. Traders are keeping a close eye on the ongoing US-China trade discussions, expecting that their outcome will shape the next move for the AUD.

Recent data from China’s customs office revealed that exports rose by 4.8 percent year-on-year in May, following an 8.1 percent increase in April, although this figure was slightly below economists’ forecast of 5.0 percent. Meanwhile, imports fell by a sharp 3.4 percent compared to last year, far exceeding the anticipated drop of 0.9 percent. As a result, China’s trade surplus climbed to $103.2 billion in May, surpassing the expected $101.1 billion.

Additional statistics from the National Bureau of Statistics showed that China’s overall inflation decreased by 0.1 percent year-on-year in May—a smaller decline than the forecast of 0.2 percent, and unchanged from April’s reading. Seasonally adjusted, consumer prices dipped 0.2 percent on a monthly basis, in line with expectations and down from 0.1 percent in the prior month. Producer prices, meanwhile, fell by 3.3 percent year-on-year, slightly larger than the 3.1 percent drop forecast after a 2.7 percent decline the previous month.

In light of the economic data, market analysts now predict that the Reserve Bank of Australia (RBA) may lower interest rates further at its July policy meeting.

In today's Asian trading, the Australian dollar reached nearly a 4‑week high of 94.24 against the yen, up from Friday’s close of 94.06, although resistance is expected around the 96.00 area. Against the U.S. dollar, euro, and Canadian dollar, the AUD advanced to 4‑day highs of 0.6519, 1.7520, and 0.8917 respectively, compared to last week’s closes of 0.6493, 1.7551, and 0.8890. If the current trend continues, resistance levels may occur near 0.66 versus the U.S. dollar, 1.73 versus the euro, and 0.90 versus the loonie.

The AUD also inched up against the New Zealand dollar, rising to 1.0803 from Friday’s 1.0795, with 1.08 expected to act as the next hurdle. Looking ahead, key U.S. economic releases – including the Consumer Board’s Employment Trends Index for May, U.S. Wholesale Inventories for April, and U.S. Consumer Inflation Expectations for May – are scheduled for the New York session.