AUD/USD Fundamental Forecast week of July 18, 2016

The AUD/USD traded at 0.7579 giving back some of its gains as the US dollar rallied on safe haven trades and strong data late in the session on Friday. The Aussie is up 0.15% as jobs data printed better than forecast. The Australian Dollar rallied against its major peers after China’s second quarter (2Q) GDP data crossed the wires. Between April and June this year, the world’s second largest economy grew 6.7 percent (YoY), better than the 6.6 percent estimate. In addition, the economy expanded 1.8 percent (QoQ) versus 1.6 percent expected. In March, China gave a target for GDP growth between 6.5 to 7 percent. This week’s report shows the parameters being met.

Being Australia’s largest trading partner, Chinese growth expansion can have a positive correlation for the nation’s economy. This can in turn cause the Reserve Bank of Australia to take action to favor a less accommodative monetary policy stance in order to subdue inflation as more capital flows between the countries. This is likely why Australian 2-year government bond yields rallied as the news was released.

While the markets are pricing in at least one RBA rate cut over the next month, China’s GDP figures appeared to subdue near term easing speculation. In other words, the markets likely interpreted the data may lead the central bank to cut rates later rather than sooner.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.