China’s Economic Growth Helps Aussie, RBA Signals About Rates Cut

The Australian dollar climbed today as the strong growth of China’s economy increased attractiveness of Australia’s currency. The Reserve Bank of Australia suggested the policy makers may cut the interest rates in the near future.
China’s gross domestic product grew 9.1 percent in the third quarter from a year ago. The increase was less than the 9.5 percent advance in the second quarter, but the slower growth means lower probability of additional measures from the government to cool the economic expansion. The industrial production and the retail sales also improved.
The minutes of the RBA policy meeting showed that the bank thought the inflation pressure is easing with the global economic slowdown and that may give incentive to reduce the interest rates. The minutes said:

Members believed that an improved inflation outlook, if confirmed by further data, would increase the scope for monetary policy to provide some support to demand, should that prove necessary.

The data showed investors bet the central bank to reduce the key cash rate by 50 basis points from the current level of 4.75 percent by the end of the year. The potential borrowing costs cut is bearish for the Aussie as the high rates attract investors interested in carry trade.
AUD/USD rose from 1.0153 to 1.0219 as of 16:02 GMT after falling to 1.0117. AUD/JPY advanced from 78.01 to 78.42 after reaching the daily low of 77.61.

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