Lowe, GDP look set to dictate where the Aussie dollar will head next

  • The Australian dollar recorded limited movement on Tuesday.
  • The local events calendar is busy on Wednesday. RBA Governor Lowe will deliver a speech while Australia’s Q4 GDP report will be released.
  • US trade and private sector payrolls data will be the headline acts in the second half of the session.

The Australian dollar ambled its way through Tuesday’s trading session, falling slightly against the greenback but rising against the major crosses.

However, the lacklustre price action may not last for long with a plethora of major data and central bank events on the way in Australia on Wednesday.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7085 , -0.0007 , -0.10%
AUD/JPY 79.26 , 0.01 , 0.01%
AUD/CNH 4.7511 , -0.0042 , -0.09%
AUD/EUR 0.6264 , 0.0011 , 0.18%
AUD/GBP 0.5376 , 0 , 0.00%
AUD/NZD 1.0413 , 0.0017 , 0.16%
AUD/CAD 0.9458 , 0.0025 , 0.27%

Having opened the session at .7092, the AUD/USD traded in a thin range between .7059 to .7096, showing little reaction to the release of further Australian Q4 GDP inputs, the RBA’s March interest rate decision and news that China has lowered its 2019 GDP growth target to a range of between 6% to 6.5%.

As is often the case, the main story of the session was the US dollar which strengthened on the back of a string of strong US economic data releases.

The ISM non-manufacturing PMI for February jumped to 59.7, driven by stronger activity levels and a surge in new orders. New home sales also exceeded expectations, lifting by 3.7% following a 9.1% surge in January.

That helped to lift the greenback again all the major crosses, although a modest improvement in investor risk appetite late in the session ensured its gains were modest.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, the performance of the Australian dollar in Asia will likely be determined by two events. The first, a speech from RBA Governor Philip Lowe at 9.10am AEDT on “The Housing Market and the Economy” and, secondly, the release of Australia’s Q4 GDP report at 11.30am AEDT.

“We see a risk that AUD/USD declines towards 0.7000 if Q4 Australian GDP is soft and Lowe strikes a cautious tone in his speech,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

Lowe has form on the board for surprising markets recently, choosing a speech early last month to change the bank’s bias on the outlook for Australia’s cash rate to an unambiguously neutral stance.

For GDP, quarterly growth of 0.3% is expected, something that will see year-ended expansion slow to 2.5% without revisions to prior data.

This 10-second guide has more on what to look out for in the GDP report.

Outside of Australia, the data and events calendar is quiet in Asia with Japanese household spending for January the only release of note.

Later in the session, ADP private sector payrolls, EIA crude oil inventories and trade data from the US are the headline acts. Canadian trade and labour productivity data will also be released.

The Bank of Canada will also announce its March interest rate decision – no change is expected.

On the central bank speakers front, Williams and Mester from the Fed are scheduled to be in action.

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