AUD’s slide likely to extend on soft China activity and Australia wage data

Any AUD strength is expected to be capped, as China's real activity data are expected to moderate and Australia's wage price index is likely to remain weak in Q2 (Wednesday; consensus: 0.6%). Business surveys are showing that labor costs remained subdued, although interestingly, the more recent surveys show that activity strengthened considerably in July. For example, the AIG services survey reported that sales rose to their highest level since 2007. Some of this strength reportedly reflected the government's temporary tax break for small business, but easier financial conditions also played a role. 

"Combining the services survey with its manufacturing counterpart, the results suggest to us that a sharp recovery in non-mining activity may finally be under way, although we reserve judgement at this point in case the July spike is not sustained. Nonetheless, we will be watching closely to see if the more widely reported NAB business survey shows a similar improvement in July," notes Barclays.