The Australian dollar is the big mover over the past 24 hours as the US dollar found a little strength and the buyers returned to the Aussie dollar.
“We saw some better than expected Chinese services PMI data yesterday, so that has materially diminished the chance of a negative Q1 GDP,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“And that’s positive for the Aussie dollar,” he added.
However, McKenna said he still believes that “Australian households face headwinds – or at least are facing into these winds – and this will impact consumption going forward, it is worth noting that the data hasn’t been terrible lately.”
According to him, while the US, G10, UK, and even EU to a certain extent, reads of the Citibank Economic Surprise index have fallen in the past month, Australia’s data has continued to print better than expected.
“But while Australian data has been beating expectations, (and that’s important) it doesn’t negate the concerns about an economic slowdown,” he said.
The worries over Q1 2017 GDP and its possible negative print came out of nowhere with the release of construction work done and the apparent acceleration in the slowdown in residential construction.
Yesterday’s release of company profits and inventory data, not to mention today’s current account and government spending data make that less likely.
According to McKenna, traders can focus on the RBA’s message that Australian growth will remain robust this year.
“But it does not change the outlook I’ve been talking about recently which is that the risks are later this year and into 2018,” he said.
Which makes the RBA governor’s statement after today’s board meeting extremely important.
“I can’t wait to see what Governor Lowe has to say today. My guess is that he will continue to retain a robust and bullish outlook for Australia’s economic future,”
“After all, it was only a month ago that the RBA said in its quarterly Statement on Monetary Policy that it expects Australian growth to accelerate toward potential – 2.75%+ – this year and next,” he said.
He added: “Any change would be a surprise to me and signal a big step back from that outlook. So we’ll all be parsing the governor’s words closely.”
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