The Australian dollar bounced back from a five-month low against the US dollar on Wednesday. China GDP grew 5.3% year-on-year in Q1, driven in part by external demand.
Last week, Morgan Stanley raised its 2024 real GDP forecast for China to 4.8%, from its previous expectation of 4.2%. But embattled real estate sector continued to show weakness.
The country’s property investments falling significantly in the last quarter, which is weighing on its iron ore import and hence the Australian economy which slowed to a crawl in Q4 2023.
Iron prices have staged a moderate rally this month after tumbling below the $100 threshold due to weak demand. Futures traded in Singapore was still down roughly 20% so far.
Falling steel production and emissions controls on highly polluting blast furnaces should shrink Chinese iron ore demand by 1% in 2024 and 2% in subsequent years, according to Capital Economics.
The World Steel Association projects robust global demand growth of 1.7%, while softer exports from India and production issues in Australia and elsewhere mean supply slippages could emerge.
The Australian dollar breached the 200 SMA and the support around 0.6450, bolstering the case of more pains ahead. The next level where buyers could return sits at 0.6330.
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