AUD/USD and NZD/USD Fundamental Daily Forecast – Bullish Investors Reacting to Forward-Looking RBA StatementInvestors are showing little reaction to the Australian GDP report because it is stale news.
Both the Australian and New Zealand Dollars surged to the upside on Wednesday before pulling back slightly. The Aussie and Kiwi jumped, as risk appetite grew on optimism that the worst of the economic downturn from the spread of the coronavirus is in the past.
The prospects of a swift global economic recovery from the coronavirus-induced collapse in world growth widened investor appetite for riskier assets, but buyers were also influenced by fresh government stimulus globally which also helped overshadow a host of other worries from the coronavirus to Hong Kong and growing U.S. civil unrest.
Reserve Bank of Australia Maintains Current Policy
Australia’s central bank held rates at all-time lows on Tuesday and sounded less gloomy as the economy gradually reopens during what is likely to be the worst quarter since the Great Depression of the 1930s.
In a statement released Tuesday announcing the Reserve Bank of Australia’s (RBA) decision to maintain its current policy settings, RBA Governor Philip Lowe said: “Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity.”
“If this continues, a recovery in the global economy will get under way, supported by both the large fiscal packages and the significant easing in monetary policies,” Lowe said.
Australia Confirms End to Longest Economic Boom as Wild Fires, Pandemic Destroy Growth
Australia’s economy has fallen into recession, the country’s treasurer said on Wednesday, after data showed gross domestic product fell last quarter as entire business sectors were closed to fight the coronavirus.
The A$2 trillion ($1.39 trillion) economy contracted 0.3% in the three months ended March, the Australian Bureau of Statistics said, the first decline in nine years.
That took annual growth to 1.4%, the slowest since the 2009 global financial crisis, as the economy was hit by the worst bushfire season in living memory, a prolonged drought and pandemic that shut down businesses and left many without jobs.
When asked if the country was already in recession, technically defined as two straight quarters of GDP contraction, Treasurer Josh Frydenberg answered in the affirmative.
“Based on what we know from Treasury, we’re going to see a contraction in the June quarter, which is going to be a lot more substantial that what we have seen in the March quarter,” he told reporters in Canberra.
Investors are showing little reaction to the Australian GDP report because it is stale news. It was priced into the market weeks ago. Investors are now betting on a fast recovery and reacting more to the statement from RBA Governor Philip which is forward-looking.
For a look at all of today’s economic events, check out our economic calendar.