The AUDUSD currency pair was trading up over 30 pips as the Australian dollar recovered against the US dollar following an earlier dip triggered by the release of Australia’s latest GDP and inflation reports, both of which missed analysts' expectations.
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The currency pair fell to new yearly lows after the Q4 2022 GDP data was released. The GDP print showed that Australia’s economy grew 0.5% in Q4 2022, missing analysts' expectations of 0.8% growth. The inflation print worsened the situation by falling to 7.4% compared to consensus estimates of 8.1%.
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Analysts are worried that the Australian economy may have entered a period of stagflation, which threatens the Reserve Bank of Australia’s goal of achieving a soft landing for the economy as inflation fell drastically from 8.4% in December to 7.4% in January.
After the initial dip, the AUDUSD currency pair rallied and traded much higher until the early American session, when it retraced some of its earlier gains. The Aussie and its neighbour, the New Zealand dollar, performed better than other leading currencies against the US dollar.
The Upbeat Chinese PMI data released earlier today further boosted the Aussie rally. The robust trade ties between China and Australia affect the Aussie’s performance, given that China accounts for most of Australia’s and New Zealand’s exports.
The US dollar fell today as the markets seem to have already priced in another rate hike by the Federal Reserve. Still, the American economy looks much more robust than many of its G7 ad G20 peers, indicating that the US dollar could rally significantly over the long term against other leading currencies.
Some analysts call for a rebound in the AUDUSD currency pair after the 450 pips decline in February. Significant selling or buying periods are typically followed by consolidative periods or a rebound before the downtrend continues, which is what we can expect from the Australian dollar.
Investors are now looking forward to the US ISM Manufacturing PMI data, which could boost the US dollar if positive or trigger further losses if it is negative.
*This is not investment advice.
The AUDUSD price chart.
The AUDUSD currency pair was trading up 30.6 pips (0.45%) at writing as the Aussie recovered against the US dollar.
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