Weak economic data from China puts additional pressure on the Australian Dollar.

The Australian Dollar extends its decline against major currencies following the latest economic data from China. On a yearly basis, China’s Retail Sales fell by 0.6%, while Industrial Production increased by 4.5%. Market participants are now focused on the upcoming Reserve Bank of Australia (RBA) policy decision, with expectations that the Official Cash Rate (OCR) will remain unchanged at 4.35%.

The Australian Dollar (AUD) remains under pressure against its major counterparts during Tuesday’s Asian session, slipping 0.16% to around 0.7060 against the US Dollar (USD). After posting gains for three consecutive sessions, the AUD/USD pair reversed lower, with losses accelerating following weaker-than-expected economic data from China.

As Australia’s largest trading partner, China plays a crucial role in shaping demand for Australian exports, making Chinese economic indicators a key driver of the Australian Dollar.

Data released by China’s National Bureau of Statistics showed Retail Sales fell 0.6% year-over-year in May, missing expectations for a flat reading and reversing April’s 0.2% increase. Fixed Asset Investment also deteriorated, contracting 4.1% compared with forecasts of a 2.0% decline and the previous 1.6% drop.

In contrast, Industrial Production provided a bright spot, rising 4.5% annually, exceeding both market expectations of 4.3% and April’s 4.1% growth.

Attention now turns to the Reserve Bank of Australia (RBA), which is scheduled to announce its monetary policy decision at 04:30 GMT. Markets widely expect the central bank to keep the Official Cash Rate (OCR) unchanged at 4.35%.

Investors are likely to focus less on the rate decision itself and more on the RBA’s policy guidance, particularly as inflation pressures show signs of easing and labor market conditions soften. Australia’s annual Consumer Price Index (CPI) slowed to 4.2% in April, below forecasts of 4.4% and down from 4.6% previously. Meanwhile, the unemployment rate unexpectedly rose to 4.5%, compared with expectations and the prior reading of 4.3%.

These developments could influence the RBA’s assessment of the economic outlook and shape expectations for the future path of monetary policy.