AUD/USD turns red as China’s PPI and Aussie business confidence drops

• The Aussie Dollar is being offered on dismal China PPI reading.  
• The decline in Australia’s business confidence is likely adding to the bearish tone around the AUD.  
• The AUD/USD pair may snap its five-day winning streak.

The bid tone around the AUD weakened, allowing a drop in the AUD/USD from the session high of 0.6869 to 0.6855 after China reported dismal producer price index (PPI) reding and the National Bank of Australia (NAB) reported a drop in the business confidence index.  

China’s producer price inflation, an indicator of selling prices for domestic production, fell by -0.8% year-on-year, having dropped by 0.3% year-on-year in July, the biggest drop since the 0.8 fall recorded in August 2016. The decline in the PPI is bad news for the AUD and other commodity currencies.  

Further, China’s consumer price index rose by 2.8% in August, beating the estimated rise of 2.7%.  

Meanwhile, Australian NAB business confidence fell to 1 in August from July’s print of 4, despite the back-to-back rate cuts by the Reserve Bank of Australia (RBA) in June and July. The business conditions index also deteriorated to 1 from 3.  

The NAB data indicates the rate cuts have so far failed to lift the business sentiment. That may put pressure on the RBA to consider more aggressive easing in the near future.  

The AUD, therefore, may remain under pressure during the day ahead and may end up snapping the five-day winning streak, its longest since January 2018.  

As of writing, the pair is trading at session lows near 0.6855, representing 0.10% losses on the day.

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