China’s Policy and the Aussie Dollar
Turning to the Aussie dollar, the People’s Bank of China (PBoC) policy measures may influence AUD/USD trends. Economists expect the PBoC to maintain the 1-Year Medium Term Lending Facility Rate (MLF) at 2.0%
However, an unexpected cut could increase Aussie dollar demand, potentially pushing the AUD/USD toward $0.67. Conversely, a lack of new stimulus may weigh on market risk sentiment, possibly dragging the AUD/USD below $0.66.
Cheaper lending rates may drive consumer borrowing, potentially fueling private consumption. A pickup in private consumption could bolster China’s economy, potentially driving demand for Aussie goods.
With China accounting for one-third of Australian exports and Australia having a trade-to-GDP ratio above 50%, increased demand from China may signal a pickup in the Aussie economy.
Australian Dollar Daily Chart
Later in the Friday session, finalized Michigan Consumer Sentiment figures could influence US dollar demand.
An upward revision to the Sentiment Index may temper bets on a December Fed rate cut, potentially pulling the AUD/USD below $0.66. Conversely, a downward revision could signal a softer US inflation outlook.
Expectations of weaker consumption and subdued inflation could fuel speculation about a December Fed rate cut. A more dovish Fed rate path could see the AUD/USD target the $0.67 level.
