1.09 0.55%
    1.24 0.71%
    0.68 1.51%
    132.42 -0.28%
    0.63 0.67%
    0.91 -0.26%
    1.34 -0.6%
    144.37 0.26%
    0.88 -0.16%

AUD/USD surges after economic data and broad US dollar decline

Sentiment seems optimistic after today's Chinese data, pushing higher risk assets.

The Australian dollar traded notably higher during the Frankfurt session Wednesday, supported by today’s batch of macroeconomic data.

Australian GDP and inflation weaken

The Australian Bureau of Statistics has announced mixed figures for the fourth quarter of Gross Domestic Product (GDP). The fourth quarter GDP statistics came in at 0.5%, below the consensus estimate of 0.8% and the Q3 number of 0.6%. At 2.7% on an annualized basis, the GDP has been consistent with projections.

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The monthly Consumer Price Index (CPI) for January fell sharply to 7.4% from 8.0% and 8.4% in the previous report. Policymakers at the Reserve Bank of Australia (RBA) will be very relieved by a massive fall in inflation numbers.

According to a recent Bloomberg study, the Australian economy will enter a recession, while the US economy will likely avoid a recession. Estimating a central bank’s terminal rate is exceedingly difficult if the economy has not yet demonstrated signs of inflation moderation. Hence, the likelihood of a recession in Australia is exceedingly high, as the path to price stability in the Australian economy is filled with obstacles.

Chinese news helped sentiment

From other news, China’s Caixin Manufacturing PMI returned to expansion with 51.6 in February, compared to 50.2 predicted and 49.9 before, as production, new orders, and employment continued to rise.

Wang Zhe, a senior economist at Caixin Research Group, stated, “After the most recent wave of Covid-19 infections receded, industrial activity rebounded. Both manufacturing supply and demand grew last month, as output progressively returned to normal and both domestic and foreign demand increased following a Covid policy shift.”

US data remain solid

Meanwhile, in the US, the Consumer Confidence Index decreased to 102.9 in February from 106.0 in January, the Conference Board said on Tuesday. At the same time, the poll’s one-year consumer inflation rate forecast component decreased from 6.6% in January to 6.3% in February.

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Nonetheless, dollar losses are expected to be modest, as economic data has continued to present a picture of a healthy US economy with persistent inflation, indicating that the Federal Reserve will continue to raise interest rates.

“This week’s main data releases will be the ISM surveys, especially Friday’s ISM services index, which has served as a benchmark for the fast swings in US growth mood over the last two prints,” ING analysts wrote in a note.

Technically speaking, as long as the Aussie trades below the 200-day moving average (the blue line) near 0.68, the immediate outlook seems bearish.

AUD/USD daily chart

AUD/USD daily chart, source: author´s analysis,


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