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22/07/24
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AUD Drops to Three-Week Low
On Monday, the Australian dollar came off a tough week with losses of 1.45% and the downtrend continues. AUD/USD traded at about 0.6664, down 0.30% for the day in the European session.
In the first two weeks of July, the Australian dollar rose by 1.9% but reversed its direction and gave up all those gains. There will be no data releases out of the US or Australia today.
On Monday, China surprised markets by reducing its benchmark lending rates. The 1-year loan prime rate was reduced from 3.45% to 3.35% and the 5-year LPR from 3.95% to 3.85%.
The Chinese central bank made the move in an attempt to bolster the economy, which is still struggling.
The GDP in China dropped to 4.7% in Q2, down from the first quarter’s 5.3% and lower than the 5.1% market estimate. Last week, the Chinese government held a plenum and released a document detailing its plans to boost the economy.
The policy update did however not contain a concrete plan to deal with major economic issues, like weak consumer confidence, deflation, and the property crisis.
If China’s interest rate cuts succeed in boosting demand and kick-start the faltering economy, it would be good for the Australian economy, which depends highly on exports to China.
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