The Australian dollar saw gains across the board on Wednesday following a better-than-anticipated GDP data figure for Q4 in 2019 and is being tipped to strive further in the coming days as interest rate differentials look less of a burden. The coronavirus still rages on but looks to be worse for other currencies like GBP. Meanwhile, the US Fed Reserves 50 basis point rate cut earlier in the week has allowed the AUD/USD rate to begin to eye up a recovery, as GBP also gains on the back of the US interest rate slash.
AUD GDP figure impresses market, taking currency higher
Yesterday saw the rise of the Aussie dollar against all major rivals following the release of official data for the Q4 GDP in 2019 which stunned markets with an impressive figure. The data showed that the GDP figure had revealed a faster-than-expected growth for the final quarter of 0.5%, down from the previous months 0.6% figure but an improvement on the expected 0.3% that the market had pencilled in for the Australian economy. The stoop in growth from Q3 was likely due to a range of varying factors which went against the Aussie currency. These include the bushfires and the unfolding coronavirus which still continues to threaten global growth and the world’s economies.
AUD and GBP both looking to turnaround their performances last month
Both AUD and GBP struggled last month. The Aussie dollar faced a significant loss of support following the heightened fears of the coronavirus outbreak as the Chinese economy started to feel the near-term effects of a reduced workforce and limitations on travel both inside and outside of the country. As market risk sentiment fell, the currency fell with it as it is heavily linked to risk and trade with China. Meanwhile, GBP saw significant losses after the fears of a no-deal Brexit cropped up once more as tensions between the UK and EU heated up. The UK is pushing for a free trade deal but in order to obtain this the EU noted that the UK must be willing to conform to EU laws post-Brexit, something that the UK has shunned from question.
Looking ahead, the Aussie dollar will see a tailwind off the back of the GDP figure, and with the US Fed announcing its 50bps rate cut on Wednesday, AUD looks to capitalise on the US move as it took pressure off the RBA’s decision to cut their rates from 0.75% to 0.50%. The market notes that thanks to Australia’s budget and current account surpluses, that the currency is likely to weather the storm whipped up in the global economy by the coronavirus.
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