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Australian dollar pressured by Chinese growth
Published on 20.01.2015 11:35

The Australian dollar is trading lower today after the latest GDP figures from China confirmed most analyst’s fears that is the Chinese economy is heading for hard times.

At 7.30pm (AEDT) the Australian dollar is trading at US81.96 cents down from US82.09 cents in yesterday’s trade.

GDP in the world's second-largest economy rose by 7.4% last year according to China's National Bureau of Statistics coming in under the government’s target of 7.5% although slightly above analysts’ expectations of 7.3%.

 The quarterly December GDP numbers were the worst performer coming in at 1.5% against a consensus of 1.7% and well down on last quarters figure of 1.9%

 This was China’s slowest growth in 25 years which doesn’t sit well for Australia as any recovery in the Australian economy will be closely connected to China, and in particular the demand for Iron ore and other commodities from the land down under.

 The Aussie dollar initially welcomed the news but then pulled back after traders digested the figures according to Commonwealth Bank currency strategist Joseph Capurso who noted,

"At first, markets bid up the Aussie because some of the data were a bit better than expected but then the Aussie gave up all of those gains,"

"The quarterly GDP number shows the Chinese economy is still continuing to slow”.

"The only reason the annual number was better was because of upward revisions to previous quarters - that's why the Aussie fell away about an hour after the data came out."

Adding fuel to the fire, the Chinese government have predicted a further slowdown in the economy this year, especially the real estate market that they believe will continue its downward trend after falling 4.5% in 2014.

Looking ahead at the difficulties China faces Premier Li Keqiang on Monday mentioned,

 "As the global economy is undergoing a deep restructuring and slow recovery, China's government will likely face heavy tasks in tackling the difficulties,"


Andrew Masters

Analyst

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