China's data and the Australian dollar: still connected?
The Australian dollar has long been treated as a proxy for Chinese demand, because China is Australia's biggest export market and iron ore is its biggest export.
The latest numbers give plenty to talk about: China's exports jumped 25% in August, Chinese producer prices were 3.8% higher than a year earlier, and Australia's economy grew 0.4% in the June quarter.
- Do you still watch Chinese releases when trading AUD/USD?
- Has the link weakened or strengthened in your experience?
- Do you use AUD/JPY or AUD/NZD to separate China-related moves from US dollar moves?
Background: China's August exports, China's inflation data and Australia's GDP.
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A way to test the connection yourself rather than relying on the textbook.
The link runs through trade: China buys a large share of Australia's exports, especially iron ore, so stronger Chinese demand has tended to support the Australian dollar. The recent data points in different directions: China's exports jumped 25% in August (report), while Australia's economy grew a modest 0.4% in the June quarter (report).
To see whether China releases still move AUD/USD:
- Note the time of the next major Chinese release on the economic calendar.
- Compare AUD/USD's move in the hour after with NZD/USD's. New Zealand also sells heavily to China, so a China effect should show up in both.
- Check AUD/JPY too. If it moves with global risk appetite rather than the release, the story that day is broader than China.
Background: commodity currencies. Members, has the link held in your recent trades?
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