AUD/USD: Australian economy rebounded sharply in fourth quarter
Macroeconomic overview
The Australian Bureau of Statistics reported GDP climbed 1.1% qoq in the fourth quarter. That handily topped market forecasts of a 0.7% gain and came as a huge relief after the third quarter's shock 0.5% decline. Growth for the year also surprised at 2.4%, up from 1.9% - an outcome that virtually shuts the door to any further rate cuts this year.
Yet neither is there much pressure for a rise in rates given measures of inflation are near historic lows and wages are growing at a pace last seen in the recession of 1991.
Indeed, real unit labour costs shrank 3.4% in the quarter implying businesses were becoming more competitive. Companies were certainly rolling in cash with surging prices for iron ore and coal lifting miners' profits by 50%.
That flood of money was a big boost to measures of national income and nominal growth. Real net national disposable income, a proxy for living standards in general, leapt 2.9% in the quarter and 6.8% for the year. Likewise, nominal GDP jumped 3.0% in the quarter, the biggest gain since mid-2010.
That will be a boon for the government since it is nominal growth that drives tax revenues and it needs all the money it can get to plug a persistent budget deficit. Ratings agency S&P Global has repeatedly cautioned that it might downgrade the country's triple A credit rating if the promised path to a surplus by 2020 were to slip again.
The AUD jumped after better-than-expected GDP data but the reaction was short-lived. Also helping the Aussie was data showing China's factory activity expanded faster than expected in February. China is Australia's No.1 trading partner.
Technical analysis
The upside momentum has diminished, but there is also no clear signal of a trend change. Overnight rejection of downward move gives a hope for a continuation of upward move.
Trading strategy
The volatility on the AUD/USD is low despite renewed strength of the USD. Sound fundamentals of Australian economy argue for further AUD/USD in the long term.
GrowthAces.com - Daily Forex Trading Strategies
The Australian Bureau of Statistics reported GDP climbed 1.1% qoq in the fourth quarter. That handily topped market forecasts of a 0.7% gain and came as a huge relief after the third quarter's shock 0.5% decline. Growth for the year also surprised at 2.4%, up from 1.9% - an outcome that virtually shuts the door to any further rate cuts this year.
Yet neither is there much pressure for a rise in rates given measures of inflation are near historic lows and wages are growing at a pace last seen in the recession of 1991.
Indeed, real unit labour costs shrank 3.4% in the quarter implying businesses were becoming more competitive. Companies were certainly rolling in cash with surging prices for iron ore and coal lifting miners' profits by 50%.
That flood of money was a big boost to measures of national income and nominal growth. Real net national disposable income, a proxy for living standards in general, leapt 2.9% in the quarter and 6.8% for the year. Likewise, nominal GDP jumped 3.0% in the quarter, the biggest gain since mid-2010.
That will be a boon for the government since it is nominal growth that drives tax revenues and it needs all the money it can get to plug a persistent budget deficit. Ratings agency S&P Global has repeatedly cautioned that it might downgrade the country's triple A credit rating if the promised path to a surplus by 2020 were to slip again.
The AUD jumped after better-than-expected GDP data but the reaction was short-lived. Also helping the Aussie was data showing China's factory activity expanded faster than expected in February. China is Australia's No.1 trading partner.
Technical analysis
The upside momentum has diminished, but there is also no clear signal of a trend change. Overnight rejection of downward move gives a hope for a continuation of upward move.
Trading strategy
The volatility on the AUD/USD is low despite renewed strength of the USD. Sound fundamentals of Australian economy argue for further AUD/USD in the long term.
GrowthAces.com - Daily Forex Trading Strategies
