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Australian Dollar at Risk as China Data Stokes RBA Rate Cut Bets

Australian Dollar at Risk as China Data Stokes RBA Rate Cut Bets

Ilya Spivak,

Fundamental Forecast for the Australian Dollar: Neutral

  • Australian Dollar Stalls as RBA Interest Rate Cut Speculation Swells
  • Soft Chinese GDP Data May Amplify Easing Bets and Sink the Aussie
  • Find Key Turning Points for the Australian Dollar with DailyFX SSI

The Australian Dollar stalled after hitting a two-month high against its US counterpart last week as a disappointing jobs report and a mortgage rate hike by Westpac Banking Corp fueled RBA easing speculation. Traders now price in a 62 percent probability of a 25 basis point reduction in the benchmark cash rate at next month’s policy meeting. That amounts to the highest conviction in on-coming easing in six weeks.

Looking ahead, the Australian unit is likely to look toward external forces for new direction cues. Chinese third-quarter GDP figures take top billing. The year-on-year growth rate is expected to slow to 6.8 percent, the weakest since the crisis trough of 6.2 percent recorded in the three months through March 2009.

Chinese economic data has increasingly underperformed relative to consensus forecasts since late July, suggesting analysts’ models have tended to underestimate the degree of slowdown in the world’s second-largest economy. That opens the door for a disappointing GDP print. China is Australia’s top trading partner, so such a result may stoke negative spillover fears and encourage RBA rate cut speculation, weighing on the Aussie.

The release of minutes from October’s policy meeting amounts to the only noteworthy bit of news-flow on the domestic front. The document rarely expands on the official policy statement in a meaningful way and seems unlikely to deliver enough market-moving fodder to generate a strong response.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.