Surf’s up for the Aussie! The Australian dollar caught one bullish wave after another this week, and it could continue being one of the better-performing currencies in the forex lineup. Here are some reasons why AUD could keep climbing:
1. RBA didn’t cut interest rates… yet.
rba statementEarlier this week, Reserve Bank of Australia (RBA) Governor Glenn Stevens and his gang of policymakers decided against cutting interest rates, allowing the Aussie to breathe a sigh of relief. The central bank wanted to stay in a wait-and-see mode, indicating in their official statement that they plan on looking at upcoming data to determine whether or not further stimulus is necessary.
Even though Governor Stevens mentioned that monetary policy should stay accommodative, he also pointed out that inflation is likely to stay consistent with their target over the next couple of years. Forex market watchers noted that there was no forward guidance suggesting that the RBA is gearing up to lower borrowing costs later on, which was interpreted as a positive sign for the Aussie.
2. Australia’s Q1 2015 GDP beat expectations.
The freshly-released Q1 GDP report gave Australia an additional confidence boost, as the actual reading came in better than expected. The economy expanded by 0.9% during the period, bringing the annualized GDP to 2.3% and outpacing the consensus of a 0.7% quarterly growth figure.
Components of the report revealed that growth was spurred mostly by the jaw-dropping 5% jump in exports, despite the drop in commodity prices then. Apart from that, the 0.5% increase in consumer spending and the pickup in mining activity also contributed positively to growth. Although business investment deducted 0.3% from the GDP reading, forex analysts decided to look at the silver lining and noted that the fall wasn’t as bad as expected.
3. Chinese stimulus to keep Australia’s exports supported?
Remember the time when the Chinese central bank went on an easing spree? Well, those stimulus efforts have yet to kick in and pull China’s economy out of the rut. Once that happens, manufacturing activity in the world’s second largest economy and Australia’s number one trade buddy could accelerate and spark stronger demand for raw materials and commodity exports.
In addition, the rebound in iron ore prices over the past months might push export volumes and values higher, paving the way for a potential pickup in mining activity and investment. Whether or not this is enough to convince the RBA to drop its easing bias remains to be seen, as the central bank is also looking at other factors such as wage inflation and business capital expenditure – both of which are still looking bleak.
For now, the Australian dollar might be able to hold on to its recent forex gains and perhaps go for more, thanks to the not-so-downbeat economic happenings in the Land Down Under. Even though the actual reports were far from being impressive, Aussie bulls found a reason to party in knowing that things weren’t as bad as expected. How long do you think this might last?
Recommended Content
Editors’ Picks
AUD/USD: A tough barrier remains around 0.6800
AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by 50 bps.
EUR/USD still targets the 2024 peaks around 1.1200
EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.
Gold surrenders gains and drops to weekly lows near $2,550
Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.
Australian Unemployment Rate expected to hold steady at 4.2% in August
The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.
Ethereum could rally to $2,817 following Fed's 50 bps rate cut
Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.