THE TAKEWAY: Chinese real estate prices ease > Data in line with the recent softening in economic conditions > Australian Dollar declines
The Australian Dollar declined in value versus the U.S. Dollar as Chinese real estate prices show signs of economic slowing. From a sample of 70 Chinese cities surveyed, prices for new residential apartments decreased in 57 cities. Moreover, 58 cities also experienced declining prices for existing residential apartments. The data fell in line with recent CPI figures which increased by 2.2 percent in June, the slowest rate of increase in 29 months.
Declining real estate prices might suggest that credit demand may also be slowing. Earlier in July the PBOC cut lending rates in an effort to provide credit-borrowing incentive, offering additional support for a possible flagging credit demand case.
Finally, softening Chinese data could have negative spillover effects to the Australian economy as China is in large demand for Aussie exports. If the Aussie economy experiences a drop in export demand, then markets may likely project a more accommodative RBA monetary stance and thus reduce expectations for rate hikes.
AUD/USD, 5 Minute Chart