AUD/USD falls on negative outlook for trade neighbor China

• AUD/USD falls following the release of weak Chinese trade data on Monday.
• The pair recovers some of the losses after the Fed’s Kashkari boosts rate cut hopes.

AUD/USD manages to recover some of its earlier losses and rises to the 0.6730 region on Monday after trading lower to 0.6700 following the release of weak export data from China, which negatively impacted the Australian Dollar (AUD) due to the close commercial ties between both countries.

China’s exports in September decreased to 2.4% year-on-year from 8.4% previously and below the expected 6.0%, according to data from China’s National Bureau of Statistics. This contributed to a trade balance for the month of $81.71 billion, lower than expected and the previous figure. The data added to the overall pessimistic view of the Chinese economy and investor disappointment over the lack of details in a recently unveiled fiscal stimulus program.

In a speech on Saturday, Finance Minister Lan Fo’an did not provide actual figures for the program, but announced that Beijing would launch a large-scale debt swap program for local governments, and said the next stimulus package could mark a multi-year turning point in China’s fiscal policy framework.

A contributing factor to the AUD/USD rally during Monday’s US session could be a speech by Minneapolis Federal Reserve Bank (Fed) President Neel Kashkari (non-voting member), who said it seems likely that “future modest reductions” in the central bank’s benchmark interest rate will be appropriate in the coming quarters. The expectation of lower interest rates is negative for the US Dollar (USD) as it reduces foreign capital inflows.

That said, the FedTracker of FXStreet, which measures the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Kashkari’s words as neutral, with a score of 5.6 . This was also above the average of 4.3 for the Fed official.