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AUD/USD: Company Gross Profits and China Under Scrutiny
On March 3, Aussie company gross profits will spotlight the AUD/USD pair and the RBA. Economists forecast company gross profits to rise 1.5% quarter-on-quarter in Q4 2024 after sliding 4.6% in Q3 2024.
A rebound in gross profits could signal increased business investment, potentially driving job creation and wage growth. Higher wages may boost consumer spending, fueling demand-driven inflation. Rising demand could temper expectations for a near-term RBA rate cut, supporting an AUD/USD move toward $0.63.
Conversely, an unexpected fall in profits may signal a weaker labor market outlook and a more dovish RBA rate path. Under this scenario, the AUD/USD pair could drop toward $0.61500.
While Aussie data will influence AUD/USD trends, China’s Caixin Manufacturing PMI also requires consideration. A rise in new orders from China could support Australian exports, given China accounts for one-third of Australia’s trade. With a trade-to-GDP ratio above 50%, stronger demand from China would likely bolster the Aussie dollar.
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Australian Dollar Daily Chart
In the US session, a higher ISM Manufacturing PMI reading could lower Fed rate cut bets. A widening US-Aussie interest rate differential, favoring the US dollar, could drag the AUD/USD pair toward $0.61.
On the other hand, if the PMI falls below the 50 neutral level, it could fuel speculation about a US recession. A more dovish Fed stance could narrow the rate differential in favor of the Aussie dollar and an AUD/USD move toward $0.63.
While stronger Chinese demand could support the Aussie, escalating US-China trade tensions could counteract those gains. A full-blown US-China trade war would weigh on Australian exports and the currency.
