AUD/USD is looking for direction around 0.6450 ahead of US employment data
- The Aussie Dollar treads water amid a strong USD and weak Australian data.
- Australian Gross Domestic Product slowed down beyond expectations in Q1.
- A positive surprise on US jopb openings has provided some support to the USD
The Australian Dollar is practically flat on the daily chart, moving back and forth around the 0.6450 area, following a reversal from the 0.6500 area on Thursday, after downbeat data and dovish RBA minutes.
The minutes of the latest RBA monetary policy meeting revealed that the bank considered a 50 bps rate cut in May, and that they are ready to deliver “rapid-fire” monetary policy actions if US tariffs hurt Australian economic growth.
Soft Australian data is weighing on the Aussie
Australian data was not particularly supportive either. Weaker-than-expected GDP growth in the first quarter, coupled with a larger-than-expected current account deficit, and an unexpected contraction in businesses’ gross operating profits seen on Tuesday, have added bearish pressure on the pair.
Data released on Wednesday showed that Australia's economy grew at a 0.2% pace in the first three months of the year, well below the 0.4% expected, following a 0.6% advance in the previous quarter. Year-on-year, the GDP remained steady at 1.3%.
In the US, on the other hand, US JOLTS Job Openings increased against expectations in April, with 7.39 million new jobs, well beyond the 7.1 million expected. These figures pushed US debt and trade tariff fears to the back seat and provided some support to the US Dollar.
Investors, however, seem to have adopted a more cautious stance on Wednesday, awaiting the release of the US ADP employment report, which will frame Friday's Nonfarm Payrolls release, and the ISM Services PMI. These figures are likely to set the US Dollar’s near-term direction later today.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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