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AUD/USD – Australian GDP, Will it be a good number

The Reserve Bank of Australia was not expected to raise or cut interest rates at their rate decision yesterday at 2.30pm AEST, and they did not disappoint.

Interest Rates were kept on hold at 2.5% which is at historical lows, as a result of the Australian economy moving away from a mining only economy.

It was, as always, the speech that was closely watched to see if there was anything in there that hinted at what the RBA might look to do in the future. Governor Glenn Stevens said that there were signs of improvement in other sectors, but firms were reluctant to ramp up investment in these areas before they see improved economic conditions.

He also said that the housing market, building approvals and retail sales had been slowing in recent months. These markets rely on lower interest rates and they have all been weak of late, in fact new home building approvals have practically slowed to a crawl. Mining investment has encountered large falls in the recent past, with the Government clearly trying to find a way beyond a one industry economy.

The RBA was also aware of the high Aussie Dollar particularly since we have seen a fall in commodity prices, in 2014 iron ore has fallen by more than 25% compared to the Australian Dollar rising by 3%. The reaction of the Australian Dollar against most majors was muted. The range for the day verses the US Dollar was kept to half of 1cent.

Now all eyes fall to the GDP release later on today, 11.30am AEST with forecasts of a rise to 3.2%