Australian Dollar Weighed by RBA Commentary, How will GDP come across?

However, maintaining a positive differential on both these fronts with its industrialized peers doesn’t necessarily mean the economy will immediately return to an aggressive pace of expansion and rate hikes. In fact, the significant increase in the second quarter current account deficit – and more poignantly, the 19 percent drop in exports – reflects a severely stunted source of growth. The RBA is certainly aware of downside risks to growth going forward considering Governor Glenn Stevens, after the decision to keep the benchmark unchanged for the fifth month at 3.00 percent, said the current level was “appropriate for the time being.” This is clearly a wait-and-see move and it has certainly deflated expectations for a rate hike this year. Looking ahead though, the 2Q GDP data due tonight may bolster the case for a 25bps hike in perhaps November or December. The expected 0.2 percent performance for the period would be a moderation from 1Q; but the market will remain sensitive to upside surprises with public spending monitored for its ability to offset poor trade and corporate earnings data.