The dollar and Chinese economic data under the microscope

The dollar remained on the defensive Monday, stuck by expectations of a Fed rate cut this month, as Asian traders were waiting for the latest update on the health of the world's second-largest economy.

The figures expected at 0200 GMT should show that China's economic growth has reached its slowest pace for almost a generation, as domestic demand weakens and trade tensions abate.

Weaker – than – expected figures for retail sales, industrial production or gross domestic product in the second quarter, up 6.2% from a year earlier, could prompt investors away from Asian currencies and the Australian dollar.

"We are seeing downside risks to Chinese economic data, especially infrastructure spending," badysts at the Commonwealth Bank of Australia wrote in a note to customers on Monday morning.

This could push up the dollar against the yuan and upset the Australian dollar, said badysts at the ABC.

Against a basket of currencies, the dollar hit the 96-day mark at 96.814, still under pressure from comments from Fed President Jerome Powell and Fed President Charles Evans, pointing out that rate cuts American are needed to boost inflation.

The dollar hovered around 107.80 yen, between support around 106.80 and resistance at 108.98. Monday is a holiday in Japan and dollar-yen trade volumes were very meager.

The euro reached 1.1270 dollar, compared to a dollar where the currency has remained since the month of June.

The dollar lost 0.4% against the single currency last week, albeit tempered by expectations that a softening of European policy would follow the Fed.

"An imminent reduction in interest rates and speculation that the US Treasury could intervene in foreign exchange markets are the two drivers of the dollar's weakness," said Michael McCarthy, chief strategist at CMC Markets in Sydney .

"Important data on China is expected in a short time, traders will probably be careful Monday morning," he said.

Unless there is a surprise in GDP, investors should focus more on China's activity data for the month of June, to find out if the economy has continued to weaken at the same time. 39, approaching the second half of the year or if its low is respected.

In the United States, the rate is expected to be reduced by 25 basis points in July, as well as by almost 20% chance of a 50 basis point reduction.

Investors will look at retail sales figures in the US by Tuesday and the company's results looking for signs showing how buyers and businesses are resisting the slowdown.