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05/06/24
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AUD Ignores Australian GDP Missing Estimates
On Wednesday the Australian dollar showed little movement after beginning the week with sharp swings. AUD/USD traded at about 0.6644, down 0.06% for the day in the European session.
GDP in Australia was disappointing and only gained 0.1% q/q in Q1. This was less than the revised gain of 0.3% in Q4 of 2023 and lower than the 0.2% market estimate. This was the slowest growth in six quarters and was due to a decline in net trade and weak domestic demand.
GDP grew by 1.1% yearly in Q1, the weakest since Q4 of 2020.
The Reserve Bank of Australia is stuck between a weakening economy and stubbornly high inflation. The RBA has kept the cash rate at 4.35% since Nov. and on Wednesday Governor Bullock reiterated that a rate hike was possible. Bullock said at a Senate committee hearing that the RBA wouldn’t hesitate to hike interest rates again if inflation stalled.
The GDP data will not likely lead to the RBA cutting rates but will decrease expectations of a rate increase. This may mean that the RBA will keep rates unchanged into next year until policymakers are confident that inflation is solidly under control.
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