The AUDUSD currency pair was trading in negative territory as the US dollar remained stronger than the Australian dollar despite being weaker overall against most of its rivals. The Aussie’s weakness was primarily attributed to the risk-off investor sentiment.
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As the week kicked off, investor risk sentiment was subdued despite China announcing no surge in new COVID-19 infections during the Lunar New Year Holiday. The news should have triggered a rally in the Australian dollar, whose performance is inextricably linked to China, but this wasn’t the case.
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Investors remain wary about a possible economic rebound in China following the wave of new COVID-19 infections after the country relaxed its strict zero-COVID rules late last year. The surge in infections that followed the relaxation of the COVID rules left many investors wondering whether China’s economy would recover.
The Chinese government has tried to reassure investors that it had everything under control. However, foreign media houses have reported that the number of COVID infections and deaths was much higher than the Chinese government and media reported.
Therefore, China has a long way to go before it can convince investors that the worst is over, which explains the Aussie’s poor performance today even as the euro and the British pound posted gains against the US dollar.
The AUDUSD currency pair’s performance is likely to be affected by the Australian retail sales data scheduled for later in the Asian session on Tuesday morning, with analysts expecting the retail sales to have contracted by 0.3% in December despite the busy holiday shopping season.
If the retail sales are better than expected, the Aussie could spike higher against the US dollar, given the US dollar’s overall weakness as tracked by the US Dollar Index (DXY). However, if the retail sales are lower than expected, the Aussie would print further losses against the greenback.
Investors will also be looking at the Australian private sector credit figures for December to see whether there was an improvement in credit access for the private sector, which plays a critical role in a country’s economic growth.
*This is not investment advice.
AUDUSD price chart.
The AUDUSD currency pair was trading down 26.8 pips (0.38%) as the US dollar rallied against the Aussie.
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