AUDUSD Pushes Higher as China’s February Trade Jumps Before Tariffs
AUD/USD jumped higher after positive data from China in February, but that’s mostly due to the upcoming tariffs in March.
After steadily climbing for the past two months, largely driven by a weaker U.S. dollar, the AUD/USD has been testing resistance at the 20-week SMA. Despite recent gains, the long-term trend has remained bearish since Q4 2024.
Earlier in February, the pair attempted another move lower, briefly dipping below 0.61. However, a delay in U.S. trade tariffs triggered a sharp rebound, pushing AUD/USD above 0.64 by late February as sellers failed to maintain control.
AUD/USD Chart Weekly – The 20 SMA Is Acting As Resistance
While the new tariffs are now in effect, their full impact on China’s economy will likely become evident next month. Forecasts suggest that Chinese retail sales and fixed asset investment were expected to rise slightly to 4.0% and 3.8% year-over-year, respectively, while industrial production is projected to slow from 6.2% in January to 5.4% in February. These figures will be followed by a National Bureau of Statistics (NBS) press conference.
Analysts anticipate that industrial production will decline further due to weakening external demand, while private sector investment could drag down fixed asset growth. It is worth noting that this economic slowdown coincides with the recent U.S. tariff increases. President Trump implemented a 10% tariff on Chinese imports starting February 4, which escalated to 20% on March 4. However, some experts argue that these measures may have unexpectedly benefited China, potentially stimulating domestic demand and production shifts.
China’s Economic Data (January-February 2025): Stronger Retail Sales & Investment, Slower Industrial Growth
Key Economic Indicators:
Retail Sales:
- +4.0% year-over-year (in line with expectations).
- Previous: 3.7% – indicating a moderate improvement in consumer demand.
Industrial Production:
- +5.9% year-over-year, above the 5.3% forecast but lower than the 6.2% in December.
- Suggests some slowdown in manufacturing activity but remains resilient overall.
Fixed Asset Investment:
- +4.1% year-over-year, well above the expected 3.2%.
- Reflects stronger-than-anticipated infrastructure and business investments.
Unemployment Rate:
- 5.4%, higher than the expected 5.1% and previous 5.1%.
- Suggests some labor market weakness, which could impact future consumer spending.
Key Takeaways:
- Retail sales growth met expectations, indicating steady consumer spending despite concerns about economic slowdown.
- Industrial production grew faster than expected, but the decline from 6.2% in December to 5.9% signals weakening external demand.
- Fixed asset investment saw a significant boost, likely driven by government stimulus measures and infrastructure projects.
- The rising unemployment rate may be a concern, as it could slow consumer demand in the coming months.
Conclusion: Mixed Signals for China’s Economic Outlook
While China’s economic data showed strength in investment and retail sales, industrial production is slowing, and unemployment is rising, reflecting lingering economic uncertainty. These figures suggest that while domestic demand remains stable, the economy still faces challenges from weakening global trade and labor market pressures.
With new U.S. tariffs in place and trade tensions escalating, China’s policy responses in the coming months will be crucial in determining whether growth momentum can be sustained. Investors will be watching for any new stimulus measures or policy shifts from Beijing to support key sectors.
AUD/USD Live Chart
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