August 1, 2023

The AUD in July 2023

US, China and local inflation news drove much of the AUD volatility in July

Take a closer look at the chart

The AUD in July

Following an above-average monthly high-low range in June, AUD/USD had a below average July, encompassing a 2.96 cents range with a low of 0.6599 on July 6 and high of 0.6895 seen on both July 13 and 14.   Early June softness in all things AUD reflected a combination of a generally stronger USD, aided by some better-than-expected economic data prints (e.g. the ISM Services rising to 53.9 from 50.3) in contrast to weaker incoming economic news from China (Caixin Services PMI 53.7 from 57.1).

USD strength reversed course a little later in July, taking AUD/USD to its highs just shy of 0.6900, after US June CPI (and PPI) inflation data fell short of expectations, boosting confidence than the upcoming (late June) Fed meeting could produce the last rate hike for this cycle. Related support for the AUD, including a degree of outperformance on various AUD cross rate, came from the improved risk sentiment/firmer equities alongside lower US money market rates and bond yields.

AUD gains were undermined at mid-month by poor China Q2 GDP (0.8% q/q) and soft June retail sales numbers, further highlighting the loss of momentum in China’s post zero covid recovery. The AUD downtrend was temporarily reversed by stronger than expected Australia employment data, before resuming on weaker than expected Q2 CPI data (0.9% for the Trimmed Mean measure against 1.1% expected) soon followed by a weak June Retail sales report (-0.8% against 0.0% expected). These two factors saw expectations for the RBA resuming policy tightening following its July pause, significantly scaled back. Ahead of the RBA’s August 1 decision, more positive news about China stimulus, and a modestly firmer CNY, provided a small boost to the AUD at the end of the month.


For further FX, Interest rate and Commodities information visit Read our NAB Markets Research disclaimer.