AUD/CNY Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average but lacks a clear driver.
Key drivers:
- Rate gap: The Reserve Bank of Australia's cautious approach contrasts with the People's Bank of China's recent monetary easing measures, leading to mixed impacts on the AUD/CNY exchange rate.
- Risk/commodities: Rising commodity prices have recently supported the AUD, although overall demand is fragile due to less favorable economic indicators from China.
- One macro factor: The recent Producer Price Index data suggests ongoing inflationary pressures in Australia, reinforcing some hawkish expectations for the RBA, despite limited exporting strength to China.
Range: The AUD/CNY rate is likely to test recent extremes without firmly breaking out of the current range.
What could change it:
- Upside risk: A further interest rate hike from the RBA could drive the AUD stronger against the CNY.
- Downside risk: Continued economic weakness in China could lead to a decline in demand for Australian exports, exerting downward pressure on the AUD.