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AUD lower despite strong Aussie GDP

The Australian dollar is in negative territory on Wednesday. Currently, the pair is trading at 0.7793, down 0.33% on the day.

Australia GDP rises 3.1%

Australia’s economy grew by 3.1% in the fourth quarter of 2020. This figure was slightly down from the 3.3% gain in Q2, but easily beat the forecast of 2.5%. Much of the gain is attributable to an increase in the price of exports, notably iron ore. An improving global economy has led to stronger demand for Australian exports, which bodes well for the country’s economic growth in 2021.

Despite this solid reading, the Australian dollar has lost ground on Wednesday. Investors appear to have focused on the Q4 year-on-year release, which showed a 1.1% decline compared to Q4 in 2019. Still, this was better than the street consensus of a 1.8% decline.

Despite the Australian dollar’s lacklustre response, the GDP release is significant. The economy continues to lift out of recession and show sustained growth, and Australia is in the enviable position of closing in on pre-Covid economic growth. Finance Minister Josh Frydenberg commented that the economy was recovering more quickly than the government had anticipated, noting that the first time in recorded history that Australia has seen two consecutive quarters of economic growth of more than 3%”.

Over in the US, the ADP Employment report disappointed, with a weak gain of 117 thousand. This was down from the previous release of 174 thousand and nowhere near the forecast of 203 thousand. The big question for investors is whether the weak ADP reading will be followed on Friday, when the official nonfarm payrolls report is released. The forecast stands at 185 thousand, and a significantly lower release could weigh on the US dollar.

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AUD/USD Technical

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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 [6]

Market Analyst at OANDA [7]
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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