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Australian GDP Disappoints

Published March 7, 2019

By Chris Wilson & Nicholas Cork

The Australian GDP came in at 2.3% for the year, below market expectations of 2.7%.  The weaker than expected number cast doubts on RBA projections earlier in the week that the economy would grow by 3% in 2019.  Annualized growth for the second half of 2018 was just 0.9%, quite a reduction from 3.8% for the first half of the year. It raised concerns that the RBA will eventually be forced to cut interest rates, with JP Morgan yesterday flipping their forecast to now have rate cuts as soon as July and August.

The Aussie fell towards 0.7020 and dragged the NZD lower in sympathy, with the cross now sitting sub 1.0400 this morning. Earlier in the day, RBA Governor Lowe had maintained his positive tone suggesting that growth would recover, and policy could be held steady, but the market has increased the odds of a rate cut anyway. With the AUD hovering above 0.7000 at the moment, today’s Retail Sales and Trade Balance releases at 11.30am this morning.

The US trade deficit surged to $59.8B in December against expectations of $57.3B, despite President Trump efforts to lower the imbalance through a series of tariffs implemented through the year.  The number raises the stakes on US-China trade negotiations with pressure on President Trump to finalize a deal to help the US export sector.  The USD ran into selling pressure on the back of this release and has helped form a bit of a base for the AUD at 0.7020 for now.

AUD under pressure as yield disadvantage back to the fore…   (Reuters)