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- AUD/USD steadies despite stronger-than-anticipated key economic data from China.
- China’s Retail Sales rose 2.8% YoY in February, beating 2.5% forecasts and December’s 0.9%.
- The US Dollar weakened as risk aversion eased after reports that the Iran war could end within weeks.
AUD/USD edges higher after two days of losses, trading around 0.7010 during the Asian hours on Monday. The pair holds ground following the release of key economic data from China. It is worth noting that any change in the Chinese economy could affect the Australian Dollar (AUD), as China and Australia are close trading partners.
The National Bureau of Statistics (NBS) reported on Monday that China’s Retail Sales climbed 2.8% year-over-year (YoY) in February against 2.5% expected and 0.9% in December. Meanwhile, Industrial Production rose 6.3% YoY in the same period, compared to the 5.1% forecast and 5.2% seen previously.
The AUD/USD pair holds ground as the US Dollar (USD) weakens as risk aversion eases after a report from The Guardian indicated that US Energy Secretary Chris Wright expects the US-Israel conflict with Iran to end within “the next few weeks,” potentially allowing oil supplies to recover and energy prices to decline.
However, the Greenback could regain momentum as Middle East tensions intensify after US forces reportedly targeted every military site on Kharg Island over the weekend, a hub that handles nearly 90% of Iran’s oil exports. While US President Donald Trump said oil infrastructure was not struck, Iran has warned it could retaliate against any US-linked oil facilities in the region.
President Trump also called on allied nations, including the UK, France, China, and Japan, to help secure the Strait of Hormuz, with reports suggesting a potential White House announcement in the coming days. Meanwhile, European Union (EU) foreign ministers are meeting in Brussels to discuss a possible naval response to the effective closure of the Strait.
Traders’ attention now turns to US Federal Reserve policy meeting due on Wednesday. While no change to the federal funds rate is expected, investors will closely monitor policymakers’ guidance for the remainder of the year, particularly regarding inflation risks stemming from the recent surge in energy prices.
