Australian Dollar Holds Gains as US-China Trade Talks Take Center Stage

Australian Dollar Holds Gains as US-China Trade Talks Take Center Stage

The Australian Dollar (AUD) is trading steady on Monday, slightly higher against the US Dollar (USD) after recovering earlier session losses. This momentum comes as traders digest mixed Chinese economic data and anticipate upcoming US-China trade negotiations set to take place in London.

China’s Economic Data: A Mixed Bag

China’s Consumer Price Index (CPI) fell by 0.1% year-over-year in May, slightly better than the -0.2% forecast but in line with April’s figure. On a monthly basis, inflation declined 0.2%, reversing a 0.1% increase in April.

Meanwhile, China’s Producer Price Index (PPI) posted a 3.3% annual decline, worsening from the 2.7% fall in April and exceeding the anticipated 3.2% contraction. This underscores persistent deflationary pressures in the world’s second-largest economy.

Despite weak inflation numbers, China’s trade balance offered support. The May trade surplus stood at CNY 743.56 billion, up from CNY 689.99 billion in April. However, exports grew just 6.3% YoY, down from April’s 9.3%, while imports contracted 2.1% YoY, after a previous 0.8% gain.

AUD/USD Benefits from China-Australia Ties

Given the strong trade links between Australia and China, any major development in Chinese data tends to sway the AUD/USD exchange rate. Although the data lacked a strong inflation push, the trade surplus and stability in CPI helped underpin AUD strength.

In addition, traders are now watching closely as US Treasury Secretary Scott Bessent and other officials begin critical US-China trade talks, which could influence overall risk sentiment and the broader currency markets.

Technical Outlook:

• AUD/USD current level: ~0.6620
• Resistance levels: 0.6650, 0.6700
• Support levels: 0.6570, 0.6525
• Bias: Neutral to mildly bullish

Related Tredu Reads:

• China’s CPI Falls Again: What It Means for Global Inflation
• US Dollar Index Retreats: Can DXY Hold the 99.00 Level?
• US-China Trade Talks Begin: Key Market Reactions to Watch

Conclusion:

With mixed signals from China’s inflation and trade reports, and the US Dollar losing some momentum, the Australian Dollar remains resilient. Market participants will continue to monitor progress in US-China trade negotiations, which may provide fresh catalysts for the AUD/USD pair.