Australian Dollar Gained as RBA Reports Stronger Economic Growth, Headwinds Exist
THE TAKEWAY: Minutes from July third meeting reports Australian economic strength > GDP growth is expected to continue at a moderate pace while inflation figures suggest easing prices and a substantial risk of spillover from European financial crisis exists > Australian Dollar gained
The Australian Dollar gained versus the U.S. Dollar after the Reserve Bank of Australia released their minutes from the July third meeting. Overall, RBA officials noted that the economy had been growing at a stronger than previously estimated rate since mid 2011 as gross domestic product registered at 4.3% over the first three months in 2012. Furthermore, the recent CPI data suggests that inflation appears to have moderated, decreasing to 1.6 percent in March 2012, year over year, from 3.1 percent in December 2011, year over year. Officials also said holding borrowing rates at 3.50% allows for “more domestic growth.”
Moreover, it was noted that there still remains a substantial risk of spillover from the European financial crisis, however recent developments from the European summit helped to boost market sentiment for the time being.
Officials also noted that China’s economy slowed at a slower rate than initially indicated and that the outlook remains uncertain.
Markets likely interpreted the data to mean that further rate cuts may not be on the horizon thus providing support for the higher yielding Aussie currency.
AUDUSD, 5 Minute Chart
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