Title: AUD/USD bears poke 0.6700 around yearly low on downbeat Aussie/China data, Fed optimism

September 7, 2022 01:45 AM ET

By: AnalysisWatch

AUD/USD is struggling to defend the 0.6700 intraday loss ahead of Wednesday's European session as risk aversion weighs on weaker data from Australia and China. Fed hawkish bets are also putting downward pressure on the Aussie pair.

Although Australia's second-quarter gross domestic product rose 3.6% y/y versus the market consensus of 3.5% and 3.3% previously, weaker quarterly data of 0.9%, versus 1.0% expected and 0.8% previously, weighed on AUD/USD prices. In doing so, the Aussie pair ignored positive comments from Australian Treasurer Jim Chalmers, who said, "There are still significant reasons to be optimistic about the economy."

That said, "China's export growth weakened in August as high inflation crippled overseas demand and new COVID restrictions and heat waves disrupted production, reviving downside risks to the economy," according to Reuters. The news also said exports rose 7.1 percent in August from a year earlier, slowing from July's 18 percent increase, according to official customs data released on Wednesday. The figure was below analysts' expectations for a 12.8 percent increase.

On the other hand, U.S. Treasury yields hit a new multi-day high, which allowed the U.S. dollar index (DXY) to return to the highs of the past two decades. That said, federal funds futures point to a 75% probability of a 0.75% rate hike in September, while CME's FedWatch tool reports a 72% probability of a 50 basis point (bps) rate hike in September, up from 57% a day ago.

S&P 500 futures hit a new seven-week low, falling 0.55% intraday to 3,890 at the latest.

Looking ahead, monthly U.S. trade balance prints and Fed Beige Book updates could entertain AUD/USD traders ahead of Reserve Bank of Australia (RBA) Governor Philip Lowe's speech early Thursday. However, special attention will be paid to the various Fed speakers scheduled to make public appearances over the next two days, including Fed Chairman Jerome Powell.