The Australian dollar is showing some jump. AUD/USD has punched above the 0.72 level today and has posted gains of 0.59%, as it trades close to 1-month highs.
Australian releases were positive, giving the Aussie a strong boost. The trade surplus widened to AUD 10.49 billion in April, up from 9.31 billion in March (AUD 9.300 billion exp.). Exports were up 1.0% and commodity prices remained strong, with a gain of 30.4%. Retail sales dipped to 0.9%, but this matched the forecast.
GDP slows but better than expected
Australia’s Q1 GDP slowed to 0.8% QoQ, after a massive 3.6% QoQ gain in Q4 of 2021. Investors were not expecting a Q4 repeat, and the first quarter reading actually outperformed, beating the estimate of 0.5%.
The whipsaw movement in GDP makes it difficult to predict the underlying strength of the economy. For the RBA, the fact that the economy is still growing means that it can continue with its rate-tightening plans. Monetary policy has not focused all that much on GDP, with the RBA concentrating on the labour market, wage growth and inflation. The RBA holds its meeting next week, and is likely to tighten by another 25-bps, which would bring the cash rate to a (still low) 0.60%. The markets are expecting the cash rate to rise as high as 3.95%, which means that the RBA plans to continue tightening into 2023.
AUD/USD Technical
- AUD/USD is testing resistance at 0.7207. Above, there is resistance at 0.7252
- There is support at 0.7121 and 0.7076
