Fundamental Australian Dollar[1] Forecast: Bearish
Australian Dollar Talking Points:
- AUD/USD[2] remains mired despite strong economic numbers
- There’s now a clear disconnect between these and interest rate expectations
- This trend won’t lift in the coming week
Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page[3]
Last week’s blockbuster second-quarter growth report failed to stop[4] the Australian Dollar from plumbing new, 20-month depths against its big US brother.
That seems a little harsh of the market when the 3.4% annualized rise in Gross Domestic Product was not only ahead of market forecasts, but also the best showing since the fall of 2012.
So why couldn’t the Australian Dollar glean more support than it did?
Well, all GDP data are open to charges of being too historic to matter in the frenetic, second-to-second world of foreign exchange. There is some truth here too.
What price second quarter data when we’re close to the end of the third? There’s also a broad suspicion that this year has been a bit front-loaded in global growth terms, with a slowing Chinese economy, seemingly endless trade spats and worries about emerging markets likely to make the second half much tougher.
Then there are some more specific Australian problems. None of them is new. Inflation remains stickily low, consumer debt remains stickily high. Indeed the markets still do not think that record-low interest rates are going anywhere for at least another year. With US rates still very likely to rise, the Aussie remains in a
