- Australian GDP unchanged at 0.4%
- RBA holds rates at 4.10%
AUD/USD edged higher on Wednesday, after sustaining sharp losses a day earlier. In the European session, AUD/USD is trading at 0.6391, up 0.19%.
Australia’s GDP Holds Steady In Q2
The Australian economy grew by 0.4% q/q in the second quarter, unchanged from the upwardly revised reading in the first quarter and matching the consensus. On an annualized basis, GDP expanded 2.1% in the second quarter, compared to an upwardly revised 2.4% in the previous quarter.
The GDP data didn’t knock anyone off their seats, but Australia’s economy has now posted growth for seven straight quarters despite weak global economic conditions. Still, household consumption was weak, falling from 0.3% to 0.1% and the household savings ratio fell from 3.6% to 3.2%. These lower readings reflect the squeeze that higher interest rates and inflation are having on households.
The Reserve Bank of Australia held rates at 4.10% on Tuesday, as expected. The RBA has maintained rates for three straight months and Governor Lowe’s swan song included the usual rhetoric about inflation remaining too high and the door remained open for further rate hikes if needed. The markets are more dovish than the RBA and have priced in a 70% chance of no further hikes from the RBA, with cuts likely to begin in late 2024.
The Federal Reserve is widely expected to pause at the September 20th meeting. The benchmark cash rate is currently in a range of 5.25%-5.50%, and a pause could signal that rates have finally peaked, although don’t expect any Fed members to publicly state that the rate-tightening cycle is over.
Inflation hasn’t been beaten and core CPI, which is a better gauge of underlying inflation than headline CPI, rose 4.2% in July, about double the Fed’s target of 2%. Federal Reserve Governor Christopher Waller said on Monday that the Fed can afford to “proceed carefully” with rate hikes, given that inflation has been falling, and if the downtrend continues, “we are in pretty good condition”.
AUD/USD Technical
- AUD/USD tested resistance at 0.6395 earlier. Above, there is resistance at 0.6458
- There is support at 0.6325 and 0.6274
