Home Forex News AUD/USD Remains Neutral After China’s Decision To Hold Loan Prime Rates Steady

AUD/USD Remains Neutral After China’s Decision To Hold Loan Prime Rates Steady

  • China decides to retain current loan prime rates.
  • Aussie dollar was unaffected by China’s loan prime rate decision.
  • Australia’s retail sales dropped by 17.9% in April.

The AUD/USD’s performance remained relatively neutral on Wednesday morning following the decision by the People’s Bank of China (PBOC) to maintain the prevailing loan prime rates. This means that the 1-year loan prime rate will remain at 3.85% while the 5-year loan prime rate will hold at 4.65%. The decision reflected on the neutral performance of the AUD/USD since Chinese data heavily influence the Aussie dollar. The lack of any change, therefore, allowed the Australian dollar to remain unchanged.

The AUD/USD performed sideways on Wednesday morning. However, it is expected to hit 0.6588, 0.6601, 0.6628, and 0.6666 if it goes long above 1.0834. It should also test the 0.6508, 0.6496, 0.6468, 0.6431 price targets if it goes short below 0.6528. The directionless performance came despite the worrying retail sales data for Australia. In April, it declined 17.9% from March on account of the coronavirus economic impact.

The AUD/USD outlook

The neutral performance in the AUD/USD exchange rate also highlights the Aussie dollar’s ability to withstand pressure from the superior greenback. This is courtesy of the Bank of Australia’s decision to hold off buying more bonds through its quantitative easing program. The last time that the RBA purchased bonds under the program was on May 5.

Although the Aussie dollar is currently demonstrating significant strength, analysts are concerned that it might be negatively affected by the upcoming Westpac leading index data. Any factors that may reduce investor confidence and risk appetite in the next few days may fuel the decline of the AUD. On the other hand, favorable economic data, including an improvement in the global economy, may contribute to the Australian dollar’s strength.


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