GDP lifts Australian dollar

The Australian dollar jumped sharply today on the back of strong GDP data which lowered expectations of another rate cut by the Reserve Bank of Australia.

At 9.30pm (GMT) the Aussie dollar was trading at US72.56c up from US72.30c in yesterday’s trade.

Data released from the bureau of statistics today showed that GDP in Australia jumped 1.1 percent on a quarterly basis, well above analysts’ expectations for a 0.8 percent rise while the yearly figure hit the market at 3.1 per cent, ahead of expectations for a figure of 2.8 percent.

The figures were in stark contrast to the recent inflation numbers and some say maybe enough to keep the RBA from cutting interest rates again in the nearest future.

Not all are convinced like Paul Bloxham who believes that low inflation throughout the year will force the RBA’s hand and they will follow up with a further rate reduction as the year unfolds,

Our view is that the RBA will probably cut its cash rate by a further 25bp to 1.50 percent in August, following the Q2 CPI print (which we expect to be low) and then hold steady at 1.50 percent in subsequent quarters, he said

The RBA is currently more focused on inflation than economic growth and today’s data confirmed that price pressures are weak, he added.

The market is pricing in a 49 percent chance that the RBA will cut rates by August in order to help boost the inflation figures.


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