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Aussie on hold ahead of GDP

The Australian dollar has recorded small gains in Tuesday trade. Currently, AUD/USD is trading at 0.7349, up 0.08% on the day.

RBA stays the course

As widely expected, the Reserve Bank of Australia remained on the sidelines at its final policy meeting of the year. After a busy November meeting, the central bank stayed in neutral gear this time around, as it monitors the effects of its most recent easing moves. At the November meeting, policymakers trimmed rates from 0.25% to 0.10%, and also implemented QE for the first time ever, announcing purchases of A$100 billion in government bonds over the next six months. Since November, Australia’s numbers have shown some improvement, in particular, on the labor front. The economy created 178.5 thousand jobs in October, well above expectations. Job creation has looked sharp, with readings above the 100-thousand level in three of the past four releases.

In the New Year, the RBA is expected to focus on fiscal policy rather than monetary policy. This means that investors can breathe easier, as the possibility of negative rates or even a zero rate appears to have been shelved. This is good news for the Australian dollar, as a further cut in rates would make the currency less attractive to investors.

With the RBA decision behind us, market focus will shift to another major event on Wednesday, GDP (00:30 GMT). The economy contracted by 7.0% in the second quarter, as Covid-19 was the catalyst behind a sharp economic downturn. Many major economies have seen double-digit rebounds in third-quarter growth, as health restrictions have been relaxed. However, the forecast for Australia GDP is quite modest, at 2.4%. Economic growth is not expected to recover to pre-pandemic levels until late in 2021, so it could be a long recovery ahead.

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AUD/USD Technical

AUD/USD continues to range-trade this week, as the weekly support and resistance lines remain intact

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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