Homepage » AUD to USD » AUD USD Exchange Rate Strengthens as Australian Economy Looks Set to Grow in the First Quarter

AUD USD Exchange Rate Strengthens as Australian Economy Looks Set to Grow in the First Quarter

Australian Dollar Exchange Rates

The Australian Dollar US Dollar (AUD USD) exchange rate advanced by almost half a cent on Monday as domestic data signalled an upbeat first quarter for the Australian economy.

AUD investors were upbeat as Australian Business Inventories surged in the first quarter, showing 1.2% growth after failing to expand in the previous quarter and beating expectations that it would only reach 0.5%.

The jump looks set to help prevent Australia from entering its first technical recession in over 25 years as the build-up in inventories is expected to added 0.4% to real GDP for the first quarter, helping to offset some lacklustre data and trade figures from the start of the year.

However some analysts suggested that strong start to the year may impact subsequent growth this year.

Tom Kennedy, an economist at JP Morgan said;

‘The mix of today’s inventory data has negative implications for upcoming quarters and is consistent with our recent first half growth downgrades. Indeed, iron ore inventories are expected to move lower, while replacement purchases of consumer items in Queensland following Cyclone Debbie will also put downward pressure on retail inventories.’

Meanwhile the US Dollar was weakened overnight on Monday following the release of the latest US Services PMI, with ISM reporting that activity slumped from 57.5 to 56.9 in May, slightly worse than the drop to 57 that economists had forecast.

The drop will be another blow to rate hike bets this year. While markets are near-certain of a rate hike later this month, many analysts are now questioning whether the Federal Reserve will stick with its plan to raise interest rates for a third time this year following a string of underwhelming data from the US in recent months.

Looking ahead movement in the AUD USD exchange rate is likely to driven by the market sentiment on Tuesday following the Reserve Bank of Australia latest rate decision.

While most analysts are convinced that the RBA will vote to leave interest rates at a record low of 1.5%, it is RBA Governor Philip Lowe’s following speech that investors are likely to focus on, with another gloomy outlook from the bank likely to cause the ‘Aussie’ to tumble.

Meanwhile an expected fall in the number of US job openings in April may cause the US Dollar to fall tomorrow, despite the decline coming as a natural consequence of the US economy nearing full employment.

Current Interbank Exchange Rates

At the time of writing the AUD USD exchange rate was trending around 0.7484 and the USD AUD exchange rate was trending around 1.3360