Australian Dollar Dunked After GDP Miss Provides Volatility. Will AUD/USD Go Lower?

The Australian Dollar sunk below 67 cents after 4Q quarter-on-quarter GDP came in at 0.5% rather than the 0.8% forecast and against the previous 0.7% revised up from 0.6%. The currency recovered later in the day on solid Chinese data. As anticipated, annual GDP to the end of December was 2.7%, revealing more upward revisions to prior quarters. The prior read was 5.9%.

Today’s GDP figures arrive before the Reserve Bank of Australia’s monetary policy meeting next Tuesday. They are anticipated to increase their cash rate target by 25 basis points (bp) to 3.60%. If they do, it will be the tenth hike since the lift-off in May last year.

The latest inflation read is way above the RBA’s target band of 2-3% at 7.8% year-on-year. Today’s data comes from yesterday’s retail sales and current account. The fourth quarter’s current account surplus came in at AUD 14.1 billion against AUD 5.5 forecast, and the previous print revised to AUD 0.8 billion from AUD -2.3 billion.

Month-on-month retail sales for January were up 1.9% rather than 1.5% anticipated and -4.0% prior. The fundamental data points toward mixed signals for the economy, but the RBA seem to have little choice but to tighten further in the near term with inflation so rampant.

The picture down the track seems somewhat opaque, with high uncertainty. Some leading indicators might be a harbinger of the headwinds ahead. Housing prices have continued slipping, and business sentiment surveys are deteriorating. Potentially compounding the problem could be the so-called ‘mortgage cliff’ where fixed rate borrowers will be re-adjusting the repayments at over 300 bp higher.

All of this illustrates the tricky road ahead for the RBA. The latest unemployment data showed the labour market loosening a fraction but still relatively tight by historical measures, with the unemployment rate at 3.7%. Reining in price pressures at a time of softening aggregate demand might lead to deepening stagflation.

This scenario might be bearish for AUD/USD, but in turn, a lower exchange rate may assist the domestic economy, especially if China can ignite its growth plans. The upcoming National; People’s Congress (NPC), which starts this weekend, may offer some insights into this prospect.

This Post Has 2 Comments

  1. e-commerce

    Wow, marvelous weblog format! How lengthy
    have you been running a blog for? you made running a blog glance
    easy. The entire look of your website is great, let alone the content material!
    You can see similar here sklep internetowy

  2. gate io

    I may need your help. I tried many ways but couldn’t solve it, but after reading your article, I think you have a way to help me. I’m looking forward for your reply. Thanks.

Leave a Reply

Important Link

Fund Your Deriv Account
Withdraw Funds to Your Local Currency
VIP Trading Signals
Learn To Trade

Contact Us

Follow Us


Forex, Crypto, Options, and Binary Options have both large potential rewards and large potential risks. Therefore, before investing or trading any of the assets, ensure you are aware of and willing to accept the accompanying risks. Do not trade money you cannot afford to lose.

All Rights Reserved. None of the content of this website can be published elsewhere by any means without the prior consent of the owner(s). Please, check our terms & conditions and privacy policy before continuing to use this website.

This website and its owner(s) are not in any way liable for any incurred loss, whether caused by the information provided on this website or otherwise. The use of this website, including the content and information provided, is the user’s sole liability.