Talking Points
- AUD/USD slipped back as Australian growth failed to beat estimates
- Some perky data for the same period may have raised false hopes
- Still, the Aussie remains quite elevated, close to this year’s peak
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The Australian Dollar slipped a little Wednesday in the immediate aftermath of official growth data which came in broadly as expected.
Gross Domestic Product rose by 0.8% on the quarter, and 1.8% on the year. This matched market forecasts but, in the wake of some strong construction and export data for the same period, investors may have dared to hope for more. If so, they were out of luck. Still, the outcome is better than the first quarter’s respective gains of 0.3% and 1.7% andis arguably not too bad given Hurricane Debbie’s baleful impact on economic activity.
Still, the Australian Dollar slipped back under US$0.80 on the news after rising steadily this week. Falls were not heavy though and AUD/USD retains solid investor support.
The growth numbers come at a crucial juncture for the year’s Australian Dollar trade. Admittedly thanks as much to US Dollar weakness as anything else, AUD/USD has poked above a trading range which has limited progress in either direction for weeks.
However, as the pair pushes back towards its highs for 2017, which are also peaks not seen since 2015, the possible reaction of the Reserve Bank of Australia will be key. The RBA is not comfortable with the Aussie’s altitude which it sees as threatening both domestic growth and its own inflation-target mandate.
It reminded us of all this on Tuesday after leaving interest rates on hold at record lows. Of course, the RBA will also often admit that US Dollar weakness is beyond its control and, if it sticks to that line bulls may be emboldened. However, it seems at least as likely that more forceful jawboning against Aussie strength will be hears if those bulls push too far further.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
