The Australian economy grew a little faster than expected last quarter, despite disappointing levels of business investment. GDP rose at the fastest pace in a year at 0.8% q/q, beating an expected rise of 0.7% q/q. The number is encouraging but isn’t likely going to impact the Reserve Bank of Australia’s decision making process. There are still many headwinds facing the Australian economy as it attempts to transition away from mining-fuelled growth.
A slump in investment is being offset by impressive growth in consumer spending, exports and the housing sector. Yet, growth is still running below-trend and could suffer later in the year. Low interest rates and a recent decline in the exchange rate are having a significant positive impact on growth, thus if either of these pillars of support were to be removed, growth would likely suffer. This means that it’s very unlikely the RBA will even start thinking about raising the official cash rate any time soon. But that still leaves us with the Aussie. If the AUD were to appreciate significantly, strong parts of the economy – trade exposed sectors – would suffer, thereby limiting growth. Even if the Australian dollar remains around present levels or weakens further, a lack of investment in non-mining parts of the economy and dwindling mining investment are going to act as a drag on growth.
Source: FOREX.com, Bloomberg
The Aussie
The Australian dollar jumped higher immediately after the data was released, but it didn’t take long for the commodity currency to sink to pre-GDP data levels against the USD. This isn’t entirely surprising given the fact that today’s data doesn’t really change anything. The market and the RBA already knew that growth is running slightly below trend and that the economy isn’t out of the woods yet. AUDUSD did briefly test resistance around 0.9000, before falling back around an hour later. Investors have their eyes on the situation in Ukraine, as well as retail sales and trade balance figures due out of Australia tomorrow and the beginning of the annual NPC in Beijing.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0900, eyes on tariffs
EUR/USD keeps the bid bias well in place so far on Tuesday, hovering above the 1.0900 barrier on the back of fresh downside pressure in the Greenback amid investors' hope of trade negotiations.
GBP/USD looks bid and approaches 1.2800
GBP/USD maintains its fresh bullish bias in the upper-1.2700s, printing marked gains in response to some loss of impulse in the US Dollar, which in turn lent fresh legs to the risk-associated universe on Tuesday.
Gold trims gains and breaches $3,000
Gold prices now lose some upside momentum and slip back below the critical $3,000 mark per troy ounce. Tuesday's recovery in the yellow metal comes on the back of the weaker US Dollar as well as steady trade tensions, while higher US yields continue to cap gains.
Who is Satoshi? Crypto lawyer sues DHS to reveal Satoshi Nakamoto's identity
James Murphy, a cryptocurrency lawyer popularly known to his followers on X as "MetalLawMan," has filed a lawsuit in a D.C. District Court against the Department of Homeland Security (DHS). He intends to uncover the real face or faces behind Satoshi Nakamoto, the pseudonymous creator of Bitcoin.
The Fed is looking at a hefty price level
We are still in thrall to tariffs, the faux-macro “data” driving markets. The WSJ editorial board advised other countries to take their tariffs to zero so that Trump’s “reciprocal” tariffs will have to be zero, too. Cute, but no cigar.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.