Australian Dollar Jumps On Resounding GDP Growth Beat


  • Australian GDP grew by 1% in the first quarter, ahead of market forecasts
  • The economy seems to be performing pretty well across the board
  • Still, interest rate rises remain quite far off, according to market pricing

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The Australian Dollar got a lift Wednesday from official growth data which managed to beat already elevated expectations.

Gross Domestic Product rose 1% on the quarter in 2018’s first three months. That was better than both the 0.9% expected and the tepid 0.4% gain of the final quarter of 2018. On an annualized basis growth was 3.1%, above both the 2.8% expected and the previous quarter’s 2.4% gain. Indeed, that was the best on-year gain since the second quarter of 2016.

The Australian economy put in a quite strong across-board performance with exports performing particularly well.

AUD/USD perked up quite a lot on the numbers,understandably. Expectations had been running quite high for this release as much recent economic news has been solid.

However, it is very likely that the Reserve Bank of Australia had some awareness of this growth strength when it left interest rates alone on Tuesday. For all its recent vigor Australian. growth remains below trend and, with both inflation and wage settlements stickily low, markets do not see any rise in the record-low Official Cash rate until well into next year.

Strong data such as this however do at least support the widely-held thesis that, when the next move comes, it will be an interest rate rise.

On its broader, daily chart, AUD/USD has moved convincingly above the trading range which contained the action for much of May.

However, Aussie bulls have yet to make good the sharp falls seen between mid and late April and, if they are going to summon up the impetus to do so, they probably need to do it soon. These GDP data will be welcome news for Australian economy watchers but they probably don’t materially change the interest rate differential dynamic which continues to support the greenback qujte unambiguously.


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— Written by David Cottle, DailyFX Research

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