- Australian GDP expanded 2.8% y/y in 4Q vs. 2.5% Excepted, 2.3% Prior
- Australian dollar jumped against US Dollar amid RBA Policy Bets
- Gains proved short-lived as souring sentiment likely weighed on the Aussie
The AUD/USD rose after Australia reported that its Gross Domestic Product expanded at 2.8 percent year over year in the fourth quarter, exceeding forecasts of 2.5 percent, and 2.3 percent prior. The two largest contributors to growth for the year were household spending which increased by 0.8 percent and exports which grew by 2.4 percent.
The Aussie jumped by roughly 50 pips immediately following the release, from 0.8947 to 0.8996. The knee-jerk reaction likely reflected a firming of expectations for a period of stability for interest rates in Australia, which bodes well for the AUD/USD’s interest rate advantage. However, the pair was unable to hold onto gains as a general weakening in risk-assets shortly afterwards likely sapped demand for the high-yielding currency.
Risk-trends are likely to remain an important driver for the Aussie over the remainder of the week with the potential for a souring of investor sentiment to strengthen safe-haven demand for the US Dollar, which in turn would weaken the AUD/USD.
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